Two-speed Oz tricky for jeweller

Half-year sales in New Zealand rose 8.5 per cent. Photo / Brett Phibbs

Jewellery retailer Michael Hill International, which boosted profit in its half-year result yesterday, is feeling the effects of Australia's two-speed economy.

Chief executive Mike Parsell said stores in Queensland and Western Australia - regions experiencing the benefits of that country's mining boom - were seeing good levels of consumer demand.

"But then you've got the other parts of the economy where they're not contributing to the mining efforts like metro Sydney and Melbourne - those markets are a bit more challenging," he said.

Australia is Michael Hill's biggest market, accounting for 149 of its 245 stores on December 31.

The NZX-listed retailer reported a 4.4 per cent lift in revenue to A$147.1 million ($190 million) for its Australian stores in the six months to December 31, with an operating surplus of A$24.4 million.

But same-store sales across the Tasman fell 1.5 per cent during the half-year, compared with a 5.7 per cent increase in the prior corresponding period, the company said.

Paul Harrison, head of equities at BT Asset Management, said Australia had been a "big profit engine" for Michael Hill, which meant the downturn in consumer spending across the Tasman was a potential concern.

Data released yesterday showing Australian unemployment had fallen to its lowest level in six months could have an adverse impact on consumer spending, as it lowered the chances of interest rate cuts for Aussie homeowners, he said. "But on the other side, if there's more jobs being created people feel better about things and possibly spend money on jewellery."

The company said total half-year operating revenue rose 7.3 per cent to $288.8 million.

Net profit lifted 11.5 per cent to $26.3 million, beating brokerage Forsyth Barr's forecast of $25.7 million.

In its New Zealand stores, half-year sales rose 8.5 per cent to $60.9 million, the company said, while revenue in its Canadian stores increased by 20.9 per cent to C$24.2 million ($29.2 million).

Parsell said the company felt as if retail conditions in the United States had "bottomed out" and were beginning to improve.

The firm reported half-year revenue of US$5.3 million ($6.4 million) for its US stores, with an operating loss of US$1.43 million - better than the US$2.1 million loss in the same period a year earlier.

Parsell said Michael Hill operated most of its US stores in the Chicago area and would consider expanding the business into other parts of the United States.

He said the Australian market continued to be difficult early in the second half, but other markets were trading "quite well".

Michael Hill shares closed up 2c at 89c last night.