Michael Hill says more store closures are imminent as it looks to downsize its footprint as more of its sales shift online.
The jewellery retailer, which operates 290 stores across New Zealand, Australia and Canada, has closed nine underperforming stores in recent weeks following disruption from the Covid-19 pandemic and expects to shut more.
Daniel Bracken, chief executive of dual NZX/ASX-listed Michael Hill International, said there would be no further closures in New Zealand outside of stores in Johnsonville, Tauranga and Upper Hutt, but he said there would be up to two more closures in Canada and an undisclosed number in Australia - its largest market with 155 stores, currently.
Bracken said the company was currently in negotiations with landlords. He would not disclose store closure estimates.
In May, Michael Hill announced that it would close nine stores globally, including five in Australia. It has since closed a further two taking the total to seven, including three in New Zealand and one in Canada.
The company said it would continue to monitor lower foot traffic into its stores.
"Confidently, I can say we don't have any plans for further closures in New Zealand, there may be one or two closures in Canada and in Australia there probably will be more to come," Bracken told the Herald.
Michael Hill had a reasonable final quarter in the FY20 year despite its physical stores being shut for around 70 per cent of the quarter.
Total adjusted same-store sales were down 4.1 per cent to A$51.6 million ($55m) compared with A$53.7m in the quarter ending June 30. Despite this, the company said it experienced some of its highest weeks of trade in its history via online sales during this period.
Its digital sales were up 193 per cent in the fourth quarter and now account for 4.6 per cent of total sales, up from 2.8 per cent in FY19.
Michael Hill's fourth quarter sales down 4%, online sales hit new highs
Bracken said the current 2021 financial year was off to a strong start with sales above the same time a year earlier. Trade had largely returned to normal pre-Covid levels in New Zealand, he said.
"If consumer confidence stays where it is today and government stimulus in all three markets stays where they are [then] we feel well-placed to have a good year."
Covid-19 had forced more people to shop online with the retailer, and as a result the increase in digital sales were reshaping the business, Bracken said.
"We've had fabulous growth in our digital business. It didn't just pop up because of Covid and now it's gone again - it's there to stay," he said.
Through lockdown the company ramped up its digital selling, including through virtual consultations, live video chats and increasingly through Instagram and WeChat. The retailer planned to roll out shopping via these social media platforms in Australia and Canada and continue to invest in alternative methods of trade, he said.
Bracken said Michael Hill had also recently rolled out a new stock management supply chain system which would enable the business to continue to invest and roll out technologies such as click and collect, click and reserve, shipping from stores, dropshipping from vendors and orders to marketplaces.
As part of cost-cutting measures in response to its initial drop in trade due to Covid, Michael Hill cancelled and deferred orders and put all of its capital projects on hold.
Bracken said the company's balance sheet was "robust" and that it did not need to undergo any capital raises.
"Our cash position at the end of the last financial year [FY20] is better than it was at the end of the previous financial year," he said.
"We have sufficient funding and funding relationships to see us through the Covid crisis and if it had gone on longer we were comfortable that we had sufficient funding in our business."