2259 GMT [Dow Jones]--Jewelry retailer Michael Hill International's sales momentum is improving, but its earnings recovery remains unproven, according to Macquarie. Same-store sales rose by 5.2% in FY26 when currency swings are stripped out. "The issue is conversion," Macquarie says. Annual comparable Ebit guidance of A$22 million-A$24 million is below Macquarie's A$28 million forecast. It also implies a 2H loss that's broadly similar to the A$8.7 million loss achieved in 2H of FY25. Macquarie retains an outperform call. "But the thesis now depends on FY27 operating leverage from higher sales density, stable gross margin, cost discipline and dividend reinstatement," it says. Macquarie cuts its price target by 6.7% to A$0.70/share. Michael Hill ended Tuesday at A$0.36.