It seems fewer people are putting a Michael Hill (ASX: MHJ) ring on it, as the retail company witnesses a decline in its sales and earning. The persisting inflationary environment has left people putting huge life events, like engagements, on the backburner till the wallet can weather this storm. Discretionary spending has declined, and balance sheets are reflecting that.

Despite economic headwinds, Michael Hill managed to achieve a 6% increase in Group sales compared to the previous year. The second half of FY23 showed some signs of recovery, with sales declining by 0.8%, showcasing a slight improvement over its most recent market update reporting a decline of 3.5% for the first 20 weeks of H2 FY23.

The Company reported that due to the current economic conditions and a decline in consumer confidence, the jewellery industry faced more difficult trading conditions in the second half, particularly in Australia and New Zealand. New Zealand’s situation was further affected by adverse weather events and a recent upswing in security incidents, resulting in additional costs.

Managing Director and CEO of Michael Hill International, Daniel Bracken said, “While acknowledging the challenging economic conditions faced globally, I am pleased with the delivery of full year sales growth in all three markets, against what was a record prior year. With second half sales flat to last year, I am encouraged by the brand elevation strategy continuing to deliver market share gains.”

Michael Hill is known for its engagement rings and other precious jewellery. For FY23, the Company anticipates its Group comparable EBIT to be in the range of $56 million to $59 million, a decrease from the previous year’s $62.9 million figure.

Michael Hill’s digital sales also faced challenges during H1 FY23 due to the cycling of the pandemic’s digital surge. Digital sales declined by 1.4% for the full year, but were still up by 21.3% on FY22. H2 FY23 saw digital sales improve by 12.3% year-on-year, indicating a positive momentum building in the digital segment.

While the Company’s margins are expected to be slightly below the peak achieved in FY22, they are projected to remain ahead of both FY21 and the pre-pandemic years. To support its strategic growth initiatives, Michael Hill secured a replacement three-year $90 million facility before the year-end.

Plus, it recently acquired the Aussie jewellery store Bevilles, a crucial move to enhance the Group’s strategy by adding a complementary and scalable brand to its portfolio. With 26 acquired Bevilles stores included, Michael Hill’s store network has now reached 304 across all markets, compared to 280 stores in the previous year.

Michael Hill saw segment revenue growth in its key markets for FY23: Australia reported a 9.1% increase, New Zealand achieved a 5.8% growth, and Canada observed a modest 0.4% rise in revenue compared to the previous year. However, the Australia and New Zealand segments experienced single-digit declines in revenue during H2 FY23.

Bracken added, “The smooth transition of the Bevilles business has seen team members highly energised, engaged and already leveraging from the Michael Hill Group. I am excited by the addition of Bevilles to the Michael Hill portfolio of brands, and our early insights only reinforce its complementary strategic fit, and reaffirms the opportunity to grow the Bevilles brand and take its offering nationally. Discussions are already well advanced to secure new store locations to open prior to Christmas, and for entry into a new state market in the new year.”