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Michael Hill profits sparkle as retail spending defies doomsayers

Business

The pandemic has proved a boon for jewellery retailer Michael Hill International with a forecast that its operating earnings for the first half will jump by as much as 40 per cent.

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And because the Brisbane-based jewellery chain is so flush with cash it will pay out its deferred dividend and restart the repayment of $25 million to staff in unpaid wages, both of which were halted last year when it was feared the pandemic would severely restrict earnings.

The announcement is another boost for the retail sector, which seems to have defied the predictions of doom. Earlier this week, clothing retailer Premier Investments forecast an 85 per cent improvement in earnings. That followed official data showing retail sales in November were up 4.5 per cent in Queensland and 7 per cent nationally.

And that may just be the start of a strong period ahead after Federal Treasury revealed that Australian households and business had saved more than $200 billion during the COVID-19 pandemic.

Deposits into savings accounts by households alone grew by more than $100 billion in the 12 months to the end of November and Treasurer Josh Frydenberg hopes the squirreled-away funds could be a platform for more spending and an economic recovery as subsidies fade away.

Wedding jewellery and gold were big sellers.

Michael Hill said it was expecting earnings before interest and tax of up to $60 million as same-store sales grew by 6.3 per cent and margin growth in all markets and channels of between 150 basis points and 250 basis points.

Digital sales were up 102 per cent for the half and now represented 5.8 per cent of total sales, more than double the result for the same period last year.

Chief executive Daniel Bracken said all areas of the business had contributed to the result and the company would emerge from the pandemic era with a leaner operating model.

“These results reaffirm our continued focus on a balance of both margin and sales growth, underpinned by a number of strategic initiatives,” he said.

“Considering the global challenges over the last year, I couldn’t be prouder of the dedication, energy and resilience consistently demonstrated by our teams.”

Shares in MHJ jumped 6 per cent in morning trade.

 

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