Jewellery retailer Michael Hill International Ltd conceded defeat last week for its 9-store US business, but will continue to look for a niche for its 30-store Emma & Roe brand.
10 days after admitting, in a Christmas season update, the future looked bleak for the US and the Emma & Roe brand, chief executive Phil Taylor said the company would negotiate exits from its US operations and reposition Emma & Roe, targeting opportunities in the emerging demi-fine jewellery segment.
The company ended 2017 with 347 stores – 317 Michael Hill, 30 Emma & Roe. Only one of the Emma & Roe stores is outside Australia – at Westfield Manukau in Auckland. It has 53 stores in New Zealand, 172 in Australia, 83 in Canada.
In the Christmas trading update, Mr Taylor said sales under the Michael Hill brand grew 4.3% and same-store sales grew 0.7% – 3.4% in New Zealand, 4.8% in Canada, flat in Australia, down 10% & lossmaking in the US. Emma & Roe grew sales by 20.1%, but same-store sales fell 5.4%.
Combined, the US and Emma & Roe represented 11% of stores at the end of 2017, but accounted for only 5% of total annual group revenues and contributed an $A12 million loss before interest & tax.
Demi-fine proposition for Emma & Roe
On Emma & Roe, Mr Taylor said last week the intention was to chase a new brand proposition aimed at capitalising on the emerging demi-fine jewellery segment & rising popularity of fine fashion. This includes an increased strategic emphasis on omni-channel and a material reduction in store numbers as part of a ‘test & trial’ period for the repositioned brand.
“The company will assess the viability of its 30 Emma & Roe stores, in conjunction with landlord negotiations, to determine the final store portfolio to trial the repositioned brand. The company currently expects this assessment to be completed by the end of February.
“The company has undertaken a comprehensive review of Emma & Roe to help shape the future strategic direction of the brand. The findings of this review identified a major opportunity in the demi-fine jewellery segment and an emergence in customer preferences towards fine fashion.
“Demi-fine is a relatively new segment of the market, combining fine jewellery with fashion for those customers seeking stylish yet affordable items to accessorise their wardrobe. By bridging the gap between these 2 categories, it allows customers with a preference for fine jewellery to achieve their desired look but at a lower price.
“The company intends to reposition Emma & Roe to this identified segment in late financial year 2018 & 2019. This will involve further investments in the company’s omni-channel capabilities to provide customers with a seamless cross-channel experience, and marketing initiatives to drive additional e-commerce revenue opportunities. This will be further supported through the revamping of stores to provide an immersive in-store retail experience and to capture the essence of the new brand positioning…
“This approach will commence with a smaller, more concentrated store footprint to allow the company to be more agile in trialling the new concept, adapting its strategy and in managing risk.”
He estimated non-cash writedowns of Emma & Roe store assets at $A7 million.
The US business, launched in 2008, has struggled to provide a return despite significant investment into developing a viable business model. Even so, Mr Taylor said helped other parts of the company: “Our time in the highly competitive US jewellery market taught us a lot and helped to strengthen our core business, including the development of our bridal collection strategy and the development of our professional care plan.”
14 January 2018: Michael Hill lifts sales but US concerns continue
Attribution: Company release.