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Why the Michael Hill (ASX:MHJ) share price is on watch today

asx share price on watch represented by group of prople all looking through magnifying glasses
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The Michael Hill International Limited (ASX: MHJ) share price is in focus today after a trading update from the jewellery group.

Why is the Michael Hill share price on watch?

Michael Hill provided an update on its second quarter trading performance for the period ended 27 December 2020.

The Aussie jeweller expects to see group earnings before interest and tax (EBIT) growth of 30–40% for the first half of the year (1H 2021). 

EBIT is forecast to be $56 million to $60 million against comparable EBIT of $41 million to $45 million in 1H 2020.

The group experienced strong same store sales growth across all markets and channels. That saw same store sales climb 6.3% for the half.

Digital sales were up 102% for the half with increased sales and margins. Digital channels now represent 5.8% of total sales for the group compared to 2.8% in 1H 2020.

The Michael Hill share price is one to watch in early trade following this morning’s update.

Michael Hill also reported continued growth of its branded collections, which now represent 38.4% of all product sales. 

The Aussie jeweller is now in a strong cash position thanks to “diligent management” of its expenditure, working capital and inventory levels.

However, coronavirus restrictions continue to weigh on international sales channels. The group reported 46 stores in its Canadian segment that closed over November and December.

The Michael Hill share price remains down 4.2% over the last 12 months but has rocketed 195.7% higher since 8 April 2020.

The Aussie jeweller also provided an update on its deferred dividend debt. After conserving cash in March 2020 by deferring payment, Michael Hill will now be paid to those eligible shareholders.

Foolish takeaway

The Michael Hill share price is one to watch in early trade after its second quarter trading update.

The company currently trades with a market capitalisation of $263.8 million with a dividend yield of 3.8% and a price to earnings (P/E) ratio of 86.2.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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