During the lockdown, surely there were many things that you would think of doing once the lockdown is over. For some, it’s popping the long-awaited question or going on an in-store luxury retail therapy to ease the post-lockdown stress. As shoppers have now been able to roam with no restriction, nothing (not even the rate rise or inflation), could stop them from spending on jewellery. For Michael Hill International (ASX/NSX: MHJ), this means good business. 

In its latest trading update of H1 FY23, the jewellery company reported 11.7% growth in sales and expected EBIT between $52m to $55m, as opposed to $51.6m EBIT in the previous corresponding period (pcp).

Following last year’s surge in digital sales from closed stores and with a strong consumer return to physical retail, the Company’s digital sales declined by 9% from last year, however they were still up 30% compared to pcp. On the other hand, to accommodate the in-store shoppers, Michael Hill focused on having strong store portfolio management, in which it closed one under-performing store in Australia and opened three new stores in key locations (two in Australia and one in Canada). 

As of 31 December 2022, Michael Hill operated 282 stores across Australia, New Zealand, and Canada. There are 148 Michael Hill stores trading in Australia with revenue growth of 18% on last year, and 8.8% on pcp

Commenting on the result, Managing Director and CEO of Michael Hill International, Daniel Bracken said: “This year, while the first quarter results were cycling store closures, the delivery of 4% growth in Q2 was outstanding, underpinned by yet another strong Christmas execution.”

“While record sales were a highlight, equally pleasing was our ability to maintain elevated margins despite significant input cost pressures and increased promotional activity in the market. Considering Canada had a record first half last year, this year’s result still delivered growth, and represents 26% growth on two years ago.” 

Outside of engagement or wedding ring sales, Michael Hill’s other non wedding-related jewellery products have surely made contributions too. 

High-ticket items have thrived amidst decrease in discretionary income due to hiking interest rates and recession rumors. However, two years of enforced savings during the lockdowns, closed borders that hinder overseas shopping trips, plus the highest inflation rate in 30 years have changed consumers’ perception of value. 

According to economist Chris Richardson, Australians have saved an extra quarter of a trillion dollars through 2020 and last year during the pandemic, which is equivalent to about eight months of total retail spending. 

People do feel bad for shopping, but certainly the impulse to spoil themselves after endlessly saving up during the lockdown without the means of spending on nice things, is bigger. Quoting Merivale Group’s Frank Roberts, “People want to make things special; ‘premium-isation’ is key to the experience. Even at the lower end of the dining spectrum, there’s cash to spare.” With more buying power and cash on hand, consumer’ appreciation for investment pieces that will go up in value over time is increasing too, and fine jewelleries are definitely on the list.

With its growth strategy of growing sales and strengthening store portfolio and being the second largest market player in the Australian fine jewellery market, Michael Hill is forecasted to increase its individual market shares over the next five years, raising industry competition and reducing enterprise numbers, mostly to compete with large international brands such as Tiffany & Co.