The rapidly changing retail landscape continues to evolve through COVID-19, with consumers now having little qualms buying goods online that traditionally had to be bought in-store. Jewellery in particular has met this trend as evidenced by retail jeweler Michael Hill (ASX: MHJ) which has reported a 54.5% increase in digital sales and the launch of a purely digital play – Medley Jewellery.
Despite difficult trading conditions for Michael Hill whose retail store network was shut down through the peak of the pandemic, some stores for 15 weeks, the Company has still reported a profitable year with net profit after tax being $3.1m, down from FY19 NPAT of $16.5m. This has been impacted by foreign exchange headwinds where profits were impacted more greatly than revenue, which was down 13.6% to $492.1m.
The Company’s decision to close 13 under-performing stores also affected total revenue.
Big movements for Michael Hill, however, came from their digital sales where their loyalty program registered more than 200,000 members and digital sales increased by 54% to $24.7m, representing 5% of total sales.
“As we complete what can only be described as an extraordinary year, we have emerged as a stronger, leaner and more professional business,” said Michael Hill CEO, Daniel Bracken.
“The strategic progress we have made across loyalty, digital, retail fundamentals and company culture, have Michael Hill well positioned to navigate both the opportunities, and the potential market disruptions ahead.”
With the increase of their digital footprint which was catalysed through the pandemic store closures across Australia, Canada and New Zealand, digital initiatives proved effective in the difficult times. These included channel marketing, digital try-ons and virtual selling
As part of their evolution to capitalise on changing consumer trends, Michael Hill will soon be launching a new brand – Medley Jewellery – which is a purely digital business targeting younger demographics than their flagship collections.
Integrating their virtual try-on, virtual selling and marketing initiatives to come, Medley’s catalogue primarily features jewellery under $200 with $1 from all sales to be donated to a Michael Hill charity partner which customers select at checkout.
“Pleasingly, gross margin improvement has continued as our investments in strategic initiatives gather momentum. Additionally, the Company has identified a number of growth and margin opportunities to strengthen our business, across product, digital and a true omni-channel offering,” said Bracken.
“I am also very excited about the launch of our new pure play digital brand – Medley. This offers us a real opportunity to expand into the high margin demi-fine category, attracting a new customer demographic in an agile and capital light manner.”
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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