Sparkling retail results this reporting season

  • Opinion
  • November 30, 2016
  • Warren Head
Sparkling retail results this reporting season

Economic growth in the form of job creation in construction and the wealth effect from soaring property values has supported consumer confidence.

As a retailer exposed to discretionary spending trends, it was heartening to see jewellery group Michael Hill produce a strong FY16 result, with EBIT up 15 percent to A$25m (16 percent growth in local currency).

The company noted strong performance in its three core markets with higher same-store sales growth and margin expansion. Same-store sales growth was surprisingly good at 7.2 percent and it appears the key driver was strong demand in Auckland.

Market analysts were truly impressed by Michael Hill’s New Zealand margins recording the seventh consecutive year of margin expansion.

Their new brand, Emma & Roe, has had an encouraging year, with same-store sales growth of 35 percent in FY16.

This brand was trialled extensively and it’s again a surprise to see the footprint is already at 16 stores.

Not to put too much gloss on the new brand - after all, it did run an FY16 loss - but it has promise. Its results were revealed for the first time and that may reflect the influence of Emma Hill becoming group chairman over the past year.

There is a more recent change at Michael Hill, with Mike Parsell, its longstanding chief executive stepping down after 16 years in that role. Emma Hill commented to NZX: “When he joined the company in our first store in Whangarei, none of us could have imagined what we would collectively achieve over the next 34 years.

“When Mike joined we had just three stores in New Zealand and we now have more than 300 stores across Australia, Canada, New Zealand and the United States, and are now rolling out the Emma & Roe brand.”  (In his time as CEO, Parsell led operations from $160m to $540m revenue today).

Group CFO Phil Taylor is acting chief executive whilst an international search is conducted by Egon Zehnder for a new CEO.

Michael Hill opened eight stores over FY16 and has reiterated its target for 200 stores in Australasia and 100 in Canada.

Smiths City

Listed retailer Smiths City Group has seen a strong start to FY17 with same store sales for the three months to July 31 10 percent higher.

Smiths City Chairman Craig Boyce told the company’s annual meeting substantial progress has been made by the group on its store network, product offering and structure.

Chief executive Roy Campbell has built traction in changes since taking over in April 2015 and promised “a path of rejuvenation and renewal” with upgrades to some store layouts as part of a wider refresh of Smiths.

Investors at the AGM were introduced to a new management team and there was reference to improved purchasing strategies backed by a mix of quality products across a range of consumer purchase area.

The 98-year old Christchurch-based company has 29 Smiths City-branded stores nationwide. It also has three stores in the recently purchased Auckland-based Furniture City business.

There was a bit of drama when Sandon Capital and Mercantile NZ opposed the re-election of two directors, Mr Boyce, chairman for 17 years and a former Smiths’ CEO, and Dunedin director and Night & Day CEO Tony Allison, representing Utilico. It was a piece of theatre that was ultimately unsuccessful.

But persistence has paid off for Sir Ron Brierley’s Mercantile NZ in its bid for Wellington Merchants, the residual shell of former Kirkcaldie & Stains. In September, Wellington Merchants’ directors recommended acceptance of Sir Ron’s cash offer. Smiths City will be on its mettle.

This story originally appeared in NZ Retail magazine issue 746 October / November 2016

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