Michael Hill on King St, Pukekohe after a robbery last year. Photo / Hayden Woodward
Michael Hill on King St, Pukekohe after a robbery last year. Photo / Hayden Woodward
Severe weather conditions and crime in New Zealand is affecting Michael Hill International’s local business, the jewellery retailer said today.
Chief executive Daniel Bracken said the company’s earnings are expected to be ahead of the previous period if sales aren’t affected further by external disruptions.
However, he noted the twoissues as something that the company was mindful of.
The Brisbane-based jeweller reported record first-half revenue of A$363.4 million, up 11 per cent, or A$30m compared to the previous half-year, despite having 22 fewer stores operating and increasing its margins.
Its net profit rose 1.2 per cent in the period to A$37.6m.
The company is “comfortable about where sales are in the first half” but can’t give specific details about sales, according to Bracken due to the impact of Cyclone Gabrielle and recent flooding across the North Island.
“The magnitude of disruptions in New Zealand has been poorly reported in Australia,” Bracken said during an earnings call with investors.
Bracken said the three Michael Hill stores in Napier, Hastings and Gisborne have been “absolutely decimated” by weather events while stores in and around Auckland have lost trading days after facing severe weather.
He said some towns will take some time to recover, but that Auckland stores have returned to “relatively normal trading performance”.
Bracken added that security costs at retailers across Auckland to counter ram raids by criminals have impacted operations.
The company is “still very much on high alert about security events”, he told investors today.
Michael Hill International chief executive Daniel Bracken. Photo / Supplied
“While our situation has improved, we’re remaining on high alert and investing in security measures in Auckland and Hamilton,” Bracken said.
He said the board will continue to invest in security in the second half of the year but has not agreed on a long-term strategy.
Bracken told the Herald that Michael Hill has invested A$2m in security guards and A$1m on safeguards such as storefronts, guardrails, fog cannons, and DNZ tracking spray.
When asked by the Herald about the company’s decision to implement measures like DNA tracking, Bracken said the company is “working closely with NZ Police” so can’t comment beyond what is advised by the police.
Bracken told investors that protection measures in NZ stores have impacted Ebit.
“With investment, it would seem those incidents are under control. We would like to think we’ve addressed as best we can,” Bracken said.
He said security spending “will be ongoing” but the company is still confident in their Ebit expectations.
While sales have returned to pre-pandemic levels, the jewellery retailer has faced increased production costs.
“Clearly, we’d like to see a significant shift downwards in crime in Auckland but I do think it’s a wider longer-term problem than a quick fix,” Bracken said.
Last year, Michael Hill’s board also announced plans to use existing cash reserves to buy back up to 5 per cent of the company’s issued capital, possibly to buy other jewellery brands.
The number of shares to buy would be “dependent on business and market conditions” and launched last September.
The on-market share buy-back would see Michael Hill acquire 8.6 million shares at A$10.2m, representing 2.2 per cent of equity.
“The company retains sufficient balance sheet strength and cash reserves for deployment into new earnings accretive growth initiatives,” Bracken said.
“These cash reserves and an undrawn debt facility reaffirm the company’s ability to pursue acquisition opportunities in the fine jewellery sector in our existing markets, which meet our strategic and investment criteria.”
