Kiwi jewellery empire Michael Hill has announced plans to exit its loss-making retail operations in the US completely.
Michael Hill International chief executive officer Phil Taylor says pulling out of the US and a simultaneously-announced strategic repositioning of the more fashion-oriented Emma & Roe brand will strengthen the foundations of the company.
In 2016-17, Michael Hill’s US retail operations and its Emma & Roe business combined represented 11 percent of the group’s retail store network but pulled in less than 5 percent of the total annual group revenue while reporting a loss of around $13 million.
Since launching in the US in 2008 as Michael Hill’s fourth overseas market, the business has struggled to make a return despite significant investment. Shortly after Michael Hill’s second New York store opened at the Roosevelt Field shopping mall during late 2015, company chair Emma Hill told NZ Retail magazine that getting to that point had been “a journey of vision, perseverance, continual learning and many ‘Oh my goodness’ moments along the way.”
Hill then said that breaking into a new market was always tough, but the US needed a different approach to achieve success. She described the company’s losses there as “a relatively small price to pay” in return for the insights being present in the US market had yielded.
“We like to think of the US as our R&D centre, and the cost of entry as the tuition fee to the world's best university."
Innovative campaigns like Michael Hill’s advertisement in the Super Bowl were part of the company’s efforts to get noticed in the US, Hill said.
"New Zealand offers a unique market where we can reach our customers monthly, and get a handsome return on our marketing spend," says Hill. "Our largest competitor in the US has over 3000 stores, a heritage of over 100 years, and a massive marketing spend enabling them to dominate the media. How do you compete with that?"
CEO Phil Taylor echoed this sentiment when he spoke of closing the US operations.
“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,” Taylor says. “However, our US operations have not gained sufficient traction in recent years and the level of capital required to scale-up the business is not warranted under current trading conditions.”
The 10 US stores will continue to trade while the company negotiates and completes its exit. Michael Hill will be seeking to redeploy the affected employees “where reasonably possible”.
The Michael Hill brand will still have around 300 stores globally once the US outlets are shut. Currently, this includes 172 Michael Hill stores in Australia, 53 in New Zealand and 83 in Canada. These stores are still performing strongly, it says, accounting for 95 percent of total group revenues.
As part of the Emma & Roe strategic repositioning, the brand’s 30 stores will be assessed for viability over this month and February.