Jewellery retailer Michael Hill has released its full year financial results to 28 June 2020, reporting that group adjusted same store sales were up 2.7% to $469.3 million.
However, the impact of COVID-19 and the ripple effect of store closures took a toll on the business through the second half of FY20, with the business reporting earnings before interest and tax (EBIT) of $14.1 million compared to $21.2 million in FY19.
The jeweller reported statutory net profit after tax of $3.1 million compared to $16.5 million last year.
Group operating revenues were down too at $492.1 million compared to $569.5 million in the previous year, while group gross margin was 60.6% compared to 62.0% in FY19.
However, similarly to many retailers throughout this period, digital sales increased rapidly, with Michael Hill reporting a 54.7% increase in eCommerce sales to $24.7 million.
The business saw digital sales account for 5% of total sales in FY20, compared to just 2.8% the year before.
Michael Hill also cites branded collection sales as a strong area for growth, with this segment representing 37.3% of sales for the year, compared to 32.5% in FY19.
The retailer's loyalty program Brilliance also launched online and in-store during this year, with the membership growing to 200,000 globally.
During the period, the jeweller opened one new store and closed 17 under performing stores, taking its footprint to 290 stores across all markets.
Commenting on the results, CEO Daniel Bracken said that while COVID has disrupted the business' operations, the retailer has traded through the period and has become a leaner and more professional business.
"As I reflect on FY20, it was certainly a year of two halves.
"Following on from the positive sales momentum achieved across FY19, the business delivered consecutive quarters of sales growth in all markets to finish the first half with +6.3% comp sales.
"As we entered the second half, we started to see the benefits of our strategies gaining traction as the business shifted its focus to a balance of both sales and margin.
"Prior to the COVID-19 store closures at the end of March, the business was successfully delivering both sales and margin growth, and was tracking to achieve increased year-on-year EBIT.
"While the COVID-19 closures had a severe impact on headline sales and profit, I was particularly proud of the determination, resilience, and agility of our team across the business through the shutdown and temporary closure periods.
"As we progressively reopened stores in all markets, we implemented robust safety protocols to protect both our team and customers, and I can confidently say that Michael Hill was best in class in this regard.
"The reopening of our store network saw pleasing sales recovery despite lower foot traffic, and a return to strong margin performance against prior year.
"This reflected the importance of the strategic progress we have made over the last 12 months and the dedication of our team members and loyal customers.
"As we complete what can only be described as an extraordinary year, we have emerged as a stronger, leaner and more professional business.
"The strategic progress we have made across loyalty, digital, retail fundamentals and company culture, have Michael Hill well positioned to navigate both the opportunities, and the potential market disruptions ahead," he said.
Australian market performance
In Australia, adjusted same store sales improved by 0.1%, while all stores revenue declined by 15.0% to $266.6 million compared to $313.6 million in FY19.
Gross margin for the year was 60.4% (FY19: 61.9%), which the business states is largely due to foreign exchange impacts on cost of goods.
13 of the 17 underperforming stores were located in Australia and were closed during the period.