Michael Hill share price surges 7% on record profit

The ASX jewellery company has posted a bullish earnings report for FY22.

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Key points

  • The Michael Hill share price jumped higher today after the jeweller posted its earnings card FY22
  • The company achieved record sales, gross margin, and profit amid COVID-19 headwinds
  • The outlook for FY23 and beyond remains positive, with the company expanding its reach and diversifying into new services

The Michael Hill International Ltd (ASX: MHJ) share price is firmly in the emerald green today, up 6.83% amid the company announcing its full-year results for FY22.

Shares of the iconic jeweller currently trade for $1.095 each. Earlier, they hit a high of $1.12 apiece shortly after market open.

Let's go over the highlights of the report.

What did Michael Hill Report?

  • Group operating revenue up 7% year over year (yoy) to $595.2 million
  • Comparable earnings before interest and tax (EBIT) up 11.1% yoy to $62.9 million
  • Statutory net profit after tax (NPAT) up 13.9% yoy to $46.7 million
  • Unfranked final dividend of 4 cents per share

Michael Hill reported delivering "record sales, gross margin, and profit" during FY22. This was despite its retail stores losing an aggregate total of 10,000 trading days due to COVID-19 lockdowns and other restrictions during the period.

One highlight of the year was that Michael Hill reported its profit grew faster than sales. The company attributed this to "margin expansion driven by strategic initiatives across product, stores, digital and loyalty".

A share buyback program will begin on 19 September and is expected to conclude on 28 August next year. A total of 19,414,267 ordinary fully paid shares, or 4.9% of this securities class, will be repurchased for a total value of around $22.7 million at the time of writing.

The unfranked final dividend of 4 cents per share has a record date of 9 September and a payment date of 23 September.

What else happened in FY22?

Michael Hill's digital sales delivered record numbers with sales of $42 million, partly because customers were forced to shop from home during lockdowns. Online sales comprised 7.1% of the company's total revenues. This channel is also becoming more important as part of its omnichannel marketing structure, the company said.

FY22 was also a year Michael Hill strengthened its balance sheet considerably, with the company noting the period ended with it holding $95.8 million in cash and no debt on its books. It was boosted by an influx of cash from the company selling its Canadian credit book for $14.2 million.

Michael Hill has 280 retail stores, noting that it closed six underperforming stores and opened one new one in Australia during the reporting period.

What did management say?

Michael Hill International managing director and CEO Daniel Bracken said:

Pleasingly, FY23 has started with both strong sales and gross margin performance. Our current bridal campaign has been extremely well received by customers and clearly demonstrates our commitment to brand elevation, our heritage, quality and craftmanship. With the significant impacts from Covid behind us, we are still mindful of potential economic disruptions. That being said, over the last few years, we have demonstrated the resilience of our business, strength of our brand and determination of our team.

What's next?

Michael Hill strongly emphasises sales and margin growth, which it pursues through several avenues. One aspect is increasing membership of its Brilliance by Michael Hill loyalty programme, which provides a source of regular and profitable customers.

Another aspect is the ongoing evolution of its products, with the company noting the popularity of synthetic diamonds will likely increase moving forward. Further improvements to its artisanal factories in Australia are scheduled, which will help make its supply chain more robust.

Michael Hill is also expanding into new territories and offering a new range of services. One market, in particular, is Quebec, Canada where the company said it's expanding its web presence. Some new services in the works also include bespoke design, financial services, and sustainability.

Michael Hill share price snapshot

The Michael Hill share price is down 21.4% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 7% over the same period.

The company's market capitalisation is roughly $421 million including today's price action.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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