Is the Michael Hill International Ltd (ASX: MHJ) share price a buy after its first quarter trading update?
Sir Michael Hill founded the jewellery business in 1979 and now has 306 stores globally across Australia, New Zealand and Canada. Its headquarters are based in Brisbane.
Michael Hill’s First Quarter Trading Update
Michael Hill reported that its positive sales momentum continued through the first quarter of FY20 with group same store sales growth of 11.9%.
Each country registered solid same store sales growth. Canadian growth was 16.4%, New Zealand growth was 10.1% and Australian growth was 6.8%.
However, the gross profit margin continues to be compressed, although things are starting to be a little better. The gross margin has improved since fourth quarter, but it isn’t recovered to historic levels. Michael Hill said the retail environment remains volatile and challenging.
Michael Hill said its new retail operating model in place and gaining traction from August with the launch of its 40th Birthday campaign. Apparently customers are responding well to the initiative.
But there were plenty of positives from the update. A focus on Canadian productivity has delivered positive results, it was ahead of the prior year.
One of the main positives was the strong increase of online sales. Actual website sales were up 18.9%. excluding the wind-down of Emma & Roe the website sales grew by 39.4% for the quarter.
During the quarter, one store was opened in Canada and three under-performing stores were closed in Australia, ending with 304 stores at the end of September 2019.
Michael Hill CEO Daniel Bracken said: “These first quarter results are a strong foundation as we enter the all-important Christmas trading period. Our leadership team have been working hard to develop new ways of maintaining and growing our customer base with many initiatives to be released over the remainder of the financial year.”
Is The Michael Hill Share Price A Buy?
It’s good to see that things are turning around for Michael Hill and bodes well for the wider retail world. Michael Hill trades on a low valuation, but I’m not sure that a jewellery retailer has a market-beating future.
For growth I would much rather buy the shares in the free report below instead.
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