Michael Hill posts flat first quarter sales as Australian weakness weighs on growth

Michael Hill International [NZX: MHI], the jewellery chain that bears the name of its founder, posted flat first quarter sales, as Australian sales declined in the less buoyant economic environment across the Tasman.

Same store growth rose 0.3 percent in the three months ended Sept. 30 from the same period a year earlier to A$96.2 million, the Brisbane-based jeweller said in a statement. On an all store basis, sales rose 4 percent to A$101.7 million.

On a same store basis Australian sales dropped 2 percent to A$62 million, offsetting a 7 percent gain in New Zealand stores to A$19.7 million and an 11 percent rise in US stores to A$2 million. Canadian same store sales rose 0.5 percent to A$12.5 million.

The company has seen relatively flat sales in Australia and New Zealand, while it chases growth in the US. The jeweller launched a new brand, Emma & Roe, to target younger customers. The first quarter numbers don't include sales for the new Emma & Roe stores, as the business develops its retail model.

In August, the company posted a 22 percent drop in annual profit to A$25 million in the 12 months ended June 30, as sales rose 9.9 percent to A$483.9 million. The company kept its annual dividend unchanged at 6.5 Australian cents per share as its two largest units struggled to gain traction and it plans for future expansion.

"The decision to maintain dividends at the same level as 2012-13 reflects the flat trading conditions in our two most profitable markets, Australia and New Zealand," chairman Michael Hill said in a statement at the time. "It also factors in the company's ambitions for growth in the coming years for both Michael Hill and Emma & Roe brands."

On a total store basis, first quarter sales for its Australian operations were flat at A$64 million. New Zealand sales rose 7.1 percent to A$19.8 million, Canadian sales climbed 16 percent to A$15.2 million and US sales jumped 22 percent to A$2.6 million.

Shares of Michael Hill were unchanged at $1.27 and have fallen 8.6 percent since the start of the year, underperforming the New Zealand Capital Index's 6.5 percent gain over the same period. The stock is rated an average of 'buy' according to the consensus of three analysts as surveyed by Reuters, with a median price target of $1.55.

(BusinessDesk)