The Michael Hill International Ltd (ASX: MHJ) share price is storming higher today following the release of its Q1 trading update for the FY21 period.
At the time of writing, the Michael Hill share price is up 10.84% to 46 cents. This compares to the All Ordinaries Index (ASX: XAO) which is down 0.1% to 6,396 points.
Let's see how the retail jeweller performed for the first quarter of the financial year.
Q1 trading update
Michael Hill reported a solid result despite COVID-19 impacting its business operations and reducing foot traffic. For the quarter ending September 27, same store sales grew to $116.7 million, up 7.3% on the prior corresponding period. The company said it remained focused on its growth strategies to support both sales and margin.
The increased margin was attributed from 100 to 200 bps for the Q1, with gross profit growth outpacing sales. Michael Hill's online sales also experienced an increase, up 129% with digital initiatives delivering a favourable outcome. Digital channels now represent 5.3% of total company sales.
Michael Hill's loyalty program saw its membership base exceed 260,000 members, reflecting an 80.9% lift from June 2020.
The company said it had carefully managed capital expenditure, working capital, inventory levels, and cost of doing business. The disciplined cost focus has helped Michael Hill maintain a healthy net cash position for the quarter end.
COVID-19 store closures
At the business end of things, Michael Hill advised it closed 44 stores over Q1 period due to COVID-19. In addition, 15 more stores were dragging down group performance as a result of low foot traffic volumes.
The company has a total of 289 stores across all markets in the Australia and New Zealand.
What did the CEO say?
Commenting on the results, Michael Hill CEO Daniel Bracken said:
I am particularly pleased with our first quarter results from both a sales and margin perspective. Although experiencing double digit foot traffic decline at a store level, we achieved a significant lift in same store sales, largely attributable to a number of key initiatives delivering material improvements in conversion and ATV.
As previously reported, our emphasis has shifted from a focus on top line sales and market share recovery, to a balance of both margin and sales growth, underpinned by our strategic initiatives. It is encouraging to see so many of these strategies now flowing through to our results.
About the Michael Hill share price
The Michael Hill share price has been falling since 2016, with previous trading highs of $1.72 now at 46 cents. With a market capitalisation of $178 million, shareholders have seen their value drop by more than 70% in the last four years.
