Michael Hill profit gains 33pc

Michael Hill. Photo / supplied

Michael Hill International, the jewellery chain bearing its founder's name, said full-year profit jumped by about a third as sales recovered in Australia, New Zealand and Canada, and the company stemmed its losses in the US.

Net income rose to $34.5 million in the 12 months ended June 30, from $26 million a year earlier, the company said in a statement to the NZX. Sales climbed 10% to $489 million. Profit and revenue beat Forsyth Barr analyst Guy Hallwright's forecasts of $33.2 million and $483.5 million respectively.

The retailer, which counts Australia as its biggest market, managed to lift sales even in the face of a difficult retail sector in most markets by spending more on marketing, inventory and consumer payment plans.

In June 2010, it closed eight of its 17 US stores, halving its operating loss in America.

"Overall trading conditions remained challenging over the past year," the company said. Earnings growth was helped by "a strong focus on growing same-store sales, managing margins and controlling costs. The directors remain confident in the continued growth and profitability of the group."

Michael Hill will pay a final dividend of 3 cents on October 10, with a record date of September 30, bringing payments for the year to 4.5 cents, up from 4 cents in 2010. The shares traded yesterday at 88 cents and have gained 29 per cent in the past 12 months.

The New Zealand dividend payment carries no imputation credits and the retailer said due to the restructuring of the company in 2008, when the intellectual property was transferred to its Australian unit, it was unlikely to be able to impute dividends for the foreseeable future.

Sales in Australia rose 12 per cent to $326.8 million and the operating surplus gained 7.6 per cent to $50.8 million.

In New Zealand, sales rose 6.2 per cent to $101.7 million and the operating surplus climbed about 16 per cent to $18.6 million.

Canadian sales jumped 22 per cent to $48 million and the operating loss narrowed to $215,000 from a year-earlier loss of $1.6 million. U.S. revenue tumbled 28 per cent to $10.6 million while the operating loss narrowed to $4.5 million from $8.7 million.

The company said its decision to shutter unprofitable US stores has been vindicated, with remaining stores now refurbished and lifting same-store sales.

Still, "further improvement is necessary in this new market before the company can be confident the business has reached a level of performance that would justify further store growth," it said.