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Michael Hill profit gains 33% as sales rise, US loss shrinks

Michael Hill FY profit rises 33% on sales growth, reduced US losses

Aug. 19 (BusinessDesk) – Michael Hill International, the jewellery chain bearing its founder’s name, said full-year profit jumped by about a third as sales recovered in Australia, New Zealand and Canada, and the company stemmed its losses in the U.S.

Net income rose to $34.5 million in the 12 months ended June 30, from $26 million a year earlier, the company said in a statement to the NZX. Sales climbed 10% to $489 million. Profit and revenue beat Forsyth Barr analyst Guy Hallwright’s forecasts of $33.2 million and $483.5 million respectively.

The retailer, which counts Australia as its biggest market, managed to lift sales even in the face of a difficult retail sector in most markets by spending more on marketing, inventory and consumer payment plans. In June 2010, it closed eight of its 17 U.S. stores, halving its operating loss in America.

“Overall trading conditions remained challenging over the past year,” the company said. Earnings growth was helped by “a strong focus on growing same-store sales, managing margins and controlling costs. The directors remain confident in the continued growth and profitability of the group.”

Michael Hill will pay a final dividend of 3 cents on Oct. 10, with a record date of Sept. 30, bringing payments for the year to 4.5 cents, up from 4 cents in 2010. The shares traded yesterday at 88 cents and have gained 29% in the past 12 months.

The New Zealand dividend payment carries no imputation credits and the retailer said due to the restructuring of the company in 2008, when the intellectual property was transferred to its Australian unit, it was unlikely to be able to impute dividends for the foreseeable future.

Sales in Australia rose 12% to $326.8 million and the operating surplus gained 7.6% to $50.8 million. In New Zealand, sales rose 6.2% to $101.7 million and the operating surplus climbed about 16% to $18.6 million.

Canadian sales jumped 22% to $48 million and the operating loss narrowed to $215,000 from a year-earlier loss of $1.6 million. U.S. revenue tumbled 28% to $10.6 million while the operating loss narrowed to $4.5 million from $8.7 million.

The company said its decision to shutter unprofitable U.S. stores has been vindicated, with remaining stores now refurbished and lifting same-store sales.

Still, “further improvement is necessary in this new market before the company can be confident the business has reached a level of performance that would justify further store growth,” it said.

(BusinessDesk)

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