The Michael Hill International Ltd (ASX: MHJ) share price surged up 11% at market open today following the company's positive trading update this morning.
Like most brick and mortar reliant retailers, Michael Hill's shares were smashed during the COVID-19-driven market rout earlier this year, falling 69% from late January through to mid-April.
Since the 8 April low, shares have rocketed 161% higher. However, that's still not quite enough to recover the losses from earlier in the year, with the share price down 14% year-to-date.
In comparison, the broader S&P/ASX 200 Index (ASX: XJO) is up 2% since 2 January.
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What does Michael Hill do?
Founded by Sir Michael Hill in 1979, Michael Hill International is a specialist retail jewellery chain, headquartered in Brisbane.
The company sells jewellery and related services. It operates 289 stores in Australia, New Zealand and Canada. The group derives its prime revenue from Australia.
What's driving the Michael Hill share price up?
In this morning's interim trading update for the 22-week period ending 29 November, Michael Hill reported growth in both same store sales and gross margin.
Same store sales increased 7.9% compared to the same 22-week period last year, while same store sales in October and November were up 8.5% year-on-year.
The company reported a significant rise in sales across all of its markets. And in a trend mirrored by most ASX retail shares, it reported a huge lift in online sales, up 110% compared to the same 22-week period in 2019.
Noting 14 of its Canadian stores are temporarily shuttered due to virus control measures, Michael Hill cautioned that it is still concerned potential new virus outbreaks and lower instore foot traffic could impact its first half earnings.
Still, the company forecasts it will likely deliver earnings before income and tax (EBIT) in the first half of the 2021 financial year "materially exceeding" the prior year half one result of $31.6 million.
Commenting on the trading update, Michael Hill's CEO Daniel Bracken said:
Across all channels and segments, the company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter. In addition to this impressive top line performance, the company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position.
Bracken added that "the two weeks of trade leading up to Christmas are critical" for the company, and it's keeping a close eye on evolving COVID-19 restrictions in Canada.
The Michael Hill share price has since retreated slightly to 58 cents, up 7.4%, at the time of writing.
