• Revenue: $360 million, down 0.7% and flat on a constant-currency basis.
• Comparable EBIT: $24.1 million for the half year ended December 29, 2024.
• Gross Margin: Broadly in line with FY24 H1; Australia at 60.5%, Canada at 60.8%, New Zealand at 58.9%.
• Digital Sales: $30.3 million, representing 8.4% of Group revenue.
• Net Debt: $9.8 million at the end of the half.
• Store Network: 294 stores at the end of the half, with 256 Michael Hill stores and 38 Bevilles stores.
• Australia Revenue: Increased by 1.2% to $205 million; same-store sales up 0.6%.
• Canada Revenue: Increased by 2.4% to CAD91 million; same-store sales up 2.7%.
• New Zealand Revenue: Decreased by 7.4% to NZD61 million; same-store sales down 7.8%.
• Inventory Reduction: Reduced by $6.6 million to $213 million.
• Cost Reduction Program: $5 million initiated in January 2025.
• Interim Dividend: No interim dividend declared for FY25 H1.

• Warning! GuruFocus has detected 5 Warning Signs with ASX:MHJ.

Release Date: February 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Canada delivered another record sales performance, indicating strong market presence and growth.
• Introduction of high-margin gifting products and increased transaction volumes during the key Christmas period.
• Strong digital sales growth, with digital sales reaching $30.3 million, representing 8.4% of Group revenue.
• Successful brand and product initiatives, including the opening of a second global flagship store in Melbourne.
• The launch of the Michael Hill Pendant Bar concept and the introduction of certified sustainable lab diamonds.

Negative Points

• Overall decline in earnings with comparable EBIT of $24.1 million due to aggressive retail competition and higher operating costs.
• Revenue decreased by 0.7% to $360 million, reflecting challenging trading conditions.
• New Zealand segment faced a 7.4% decrease in revenue, highlighting ongoing economic challenges.
• No interim dividend declared for FY25 H1 due to compressed earnings.
• Seven stores were permanently closed, indicating a reduction in physical retail presence.

Q & A Highlights

Q: Can you comment on the recent improvement in sales and how confident you are that sales across the Group will remain positive through the second half? A: Andrew Lowe, CFO: We saw a sales recovery starting in December, which has continued into January and February. Factors like the recent interest rate cuts in Australia and New Zealand are contributing to this positive trend. However, the uncertainty remains about the speed and extent of recovery, so we must continue trading cautiously.

Q: What is driving the increased rate of store closures, and how confident are you in expanding Bevilles? A: Andrew Lowe, CFO: The closures are part of a strategic decision to optimize our store network, focusing on profitability. While some closures are happening, sales in Australia are still up. For Bevilles, we are being deliberate in site selection to avoid past mistakes of over-expansion. Each new store must meet strict investment criteria.

Q: Are your initiatives to improve margins, such as focusing on lab-grown diamonds, a short-term strategy or a structural pivot? A: Andrew Lowe, CFO: It's a tactical response to consumer demand rather than a structural change. Lab-grown diamonds offer higher margins and meet consumer interest in sustainable options. The Pendant Bar concept also aligns with consumer demand for lower price-point offerings without compromising on margins.

Q: Can you give us a sense of margin direction and the impact of lower selling price products on gross profit? A: Andrew Lowe, CFO: Margins have been impacted by promotional activities and high input costs. We aim to restore margins to pre-COVID levels over time. Lower price-point products like the Pendant Bar are high-margin and have been successful, but we maintain a balance to ensure sales are not negatively impacted.

Q: What are you expecting to discover from the review of the New Zealand business? A: Andrew Lowe, CFO: The review aims to ensure we are well-positioned for recovery as the New Zealand economy improves. The economic downturn has been prolonged, and we want to capitalize on the market when conditions improve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.