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Michael Hill share price on watch after second quarter update

James Mickleboro
young excited woman holding shopping bags

The Michael Hill International Ltd (ASX: MHJ) share price will be on watch today after the release of a trading update.

What did Michael Hill announce?

With a number of retailers going into administration this month, you’d be forgiven for expecting a disappointing update by the jewellery retailer.

However, Michael Hill has managed to largely buck the trend with a solid finish to the year.

According to the release, all regions delivered positive same store sales for the second quarter of FY 2020. This led to group sales growth of 3.3% and group same store sales growth of 4% for the quarter.

For the half, group sales were up 5.6% on the prior corresponding period to $327.35 million, with first half same store sales up 6.5%.

The key driver of its growth during the second quarter was the Black Friday sales event. Though, this appears to have pulled forward sales, leading to subdued Christmas trading.

Michael Hill’s CEO, Daniel Bracken, said: “Overall, we are pleased with our result for this all important second quarter. The business had a solid October and a very strong November on the back of launching our Christmas campaign early to capitalise on the Black Friday weekend. While the shift in consumer behaviour saw a significant uplift in November sales in all markets, our sales in early December were somewhat disappointing.”

What about its profits?

The company hasn’t provided an update on its bottom line during the half. Instead, it will reveal all with its half year results release next month.

Management did, however, reveal that it has continued to experience gross margin pressures. This follows deep-discounting from many of its competitors.

Mr Bracken also warned that: “The Australian retail environment was particularly difficult given prevailing low consumer confidence, the competitive environment in our industry segment, together with foreign exchange and gold price headwinds.”

But the company’s CEO appears optimistic on the future.

He concluded: “These results position us well for the balance of the year, as we focus on key initiatives and brand profile in each market. There is a real air of enthusiasm across the business with a focus on delivery of initiatives that continue into the second half.”

The post Michael Hill share price on watch after second quarter update appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020