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Michael Hill rejigs strategy for rest of year

By Rebecca Howard

Oct. 24 (BusinessDesk) - Michael Hill International has adjusted its marketing strategy for the remainder of the financial year after alternative promotions didn't bring enough customers through the door.

The retailer restructured its business this year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and make better use of other sales channels, such as online. It also slashed the amount and level of discounting and the frequency of price-based event days as people were deferring purchases to take advantage of those events.

The move had a larger impact on sales than anticipated and the firm posted an 8.8 percent decline in first-quarter sales. Same-store sales were down 11 percent and a "poor" result, chair Emma Hill said in speech notes for the annual general meeting.

Chief executive Phil Taylor acknowledged the strategy hadn't attracted customers into the stores but said the move away from heavy discounting remains "the right strategy for Michael Hill."

"We have now moved to adjust our promotional activity for the balance of the financial year," he said. Hill said that management has implemented a "range of initiatives" to ensure strong performance during the key Christmas trading period.

"We are in the mid-market and are up against strong discounting in all markets," Taylor said. "As such we will continue to have great offers and competitive pricing so our stores can continue to compete on a day to day basis,"

He reiterated that the company needs to "back away from overly aggressive discounting and pricing" but acknowledged it was a difficult balance to achieve.

"We will continue to assess the impact as each month goes by and adjust our activity and pricing accordingly," he said.

The company said it remains committed to expanding the Michael Hill brand in Australia, Canada and New Zealand. It plans to open a minimum of 10 new stores this year across the three markets, subject to site availability.

It said its gross margin return on investment in inventory lifted to $1.48 during the year to June 30, from $1.42 the year before. The company is "targeting further improvement" in the current financial year.

The shares lifted 4.2 percent to 75 cents.



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