Michael Hill: Increase in serious crime impacting stores

Jewellery chain Michael Hill International (MHI) in an earnings update today said serious crime was affecting several of its New Zealand stores.

New Zealand was MHI’s most challenged country for operations, with deeper macroeconomic pressures significantly impacting consumer behaviour and discretionary spend.

“The continued negative sales results are also driven by a decline in consumer credit approval rates across the country and an increase in serious retail crime events impacting a number of our stores,” MHI said.

Ram raids have hit multiple MHI stores, with repeated offending causing the closure of its Takapuna branch.

MHI, in its report on the 45-week period to May 12, said positive sales momentum had been expected through the second half in line with anticipated improvements in consumer sentiment and economic conditions.

“Unfortunately this has not materialised, with second-half sales performance broadly in line with the first half, and margin still under pressure,” MHI said.

Shares in MHI slumped by 11c or 16.6 per cent to 55c - their lowest point since November 2020 - in response to the report.

MHI said its New Zealand sales for the period were down 11.1 per cent.

Group sales for the first 45 weeks of 2024, including Bevilles, were up 4.7 per cent on last year, and sales for the core Michael Hill brand were still negative compared with last year.

MHI bought the Australian family-owned Bevilles Jewellers in a $45 million all-cash deal last year.

The company said the Bevilles brand had not met sales expectations.

Canada was MHI’s best-performing segment, and was broadly flat on a record prior year.

“All markets continue to experience aggressive promotionally-led retail trading conditions, which is also contributing to margin pressure,” the company added.

“Given the compressed sales and continued gross margin decline, previously reported first-half earnings have been eroded by an Ebit loss of about $10m for the third quarter of 2024.

“As the business navigates the prolonged impact of cost of living pressures on consumer sentiment, management is activating initiatives to stimulate sales and restore margin,” MHI said.

There was also a heightened focus on managing operational costs and capital expenditure.

Actions have been taken to reduce costs across the business including inventory, corporate overheads, under-performing stores and further optimisation of store rostering.

Managing director and chief executive Daniel Bracken said there was no doubt consumer discretionary spend, and the fine jewellery category in particular, was under pressure due to macroeconomic forces.

“Higher interest rates are leading to a sustained and prolonged decline in consumer spending,” he said.

“Looking forward, as interest rates moderate, we anticipate sales and margin recovery,” Bracken said.

Rising crime in the form of ram raids has forced other shops to close.

Last week, one of the country’s largest telecommunications businesses, One NZ, closed its busy Auckland downtown store over staff safety concerns.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.