Investors flee Michael Hill after it fails to deliver a decent rock — again
Michael Hill investors are running for the exits after the company said bad quarterly results were because it couldn’t get its marketing right.
The stock plunged 23 per cent to 69c on Monday morning.
The jeweler (ASX:MHJ) has just admitted that quarterly group revenue dropped 8.8 per cent to $112m from $122m, and some store sales were down by 11 per cent.
“This reduction is partly attributable to underestimating marketing and promotional activities required to support the group’s strategic shift away from a reliance on discount based pricing,” it said.
Michael Hill International CEO Phil Taylor said they increased gross margins as per the new strategy not to keep discounting, but they neglected to support the shift with any marketing.
Gross margins lifted ever so slightly to 64.6 per cent compared to 63.1 per cent in the same quarter last year.
He also said the transition from brick-and-mortar retailer to one that embraced ecommerce was “proving more challenging than expected”.
“Good progress has already been made on our digital and data strategies,” Mr Taylor told investors.
“We expect the results of our renewed strategy to be progressively realised over this and following years.”
Michael Hill is also realising just how useful the Internet can be for selling things: revenue from online sales was up 84.9 per cent in the quarter. The company did not provide dollar figures for online sales.
Michael Hill is just one of several local Australian retail brands feeling the heat over the past 12 months.
Michael Hill has stores in Australia, New Zealand and Canada. It is also listed on the New Zealand stock exchange.
The brand also had a presence in the US, but it was forced to exit those operations in January after stores contributed to a $US5.6 million ($7.6 million) loss in the first half of 2018, which management deemed not worth the 5 per cent in overall sales the US market contributed to the bottom line.
In fiscal 2018, the company posted a net profit after tax of $34.8m, down 21 per cent from $44m in 2017.