Michael Hill has reported a tale of two positions in its latest trading update.
The jeweller has reported strong same store sales growth in all markets and channels in the 22-week period to November 29, but simultaneously holds concerns over the sustained COVID impacts on its operations in Canada.
"While this trading announcement is focused on the positive start to the first 22 weeks of FY2021, as we enter the final critical weeks of Christmas trade, concerns remain around further COVID-19 outbreaks, lower instore foot traffic, and their potential impact on first half earnings," the business said in a statement.
"In accordance with local provincial requirements, 14 Canadian stores are temporarily closed, and could remain closed through December, due to COVID-19 lockdowns.
"The Company continues to monitor the potential impact on trading conditions in Canada," Michael Hill said.
During the period, Michael Hill reported same store sales were up 7.9% compared to last year, while same store sales for the October/November period were up 8.5%, against last year.
In Australia, Michael Hill's same store sales increased 14% for the period, while all stores declined by 0.9%.
The retailer also reported that it sustained margin improvement, reporting margin growth of ~200 bps for the 22-week period, underpinning an increase in gross profit.
Meanwhile, digital sales continued to grow with all markets reporting a lift, resulting in online sales increasing by 110% for the period.
Michael Hill CEO Daniel Bracken said that the business is prepared to deliver strong trade through Christmas.
"Across all channels and segments, the Company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter.
"In addition to this impressive top line performance, the Company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position.
"These results reinforce our commitment to the strategic initiatives across retail fundamentals, omni-channel, loyalty and product evolution.
"As we enter the all-important month of December, I’m pleased that the Company is well-placed with a strong product offering, our best ever Christmas campaign, and an energised retail team across all geographies.
"Having said this, the two weeks of trade leading up to Christmas are critical to the Company’s overall performance and we are keeping a close eye on the evolving restrictions in Canada.
"The health and safety of our team members and customers remains a priority for the Company as we continue to provide team member support and ensure appropriate instore protocols are available," he said.
Despite the concerns held for the operations in Canada, the retailer anticipates that it will still deliver an EBIT result for FY21H1 materially exceeding the FY20 first half result of $31.6 million, before taking into account the favourable impact of wage subsidies and AASB 16 Leases.