The company reveals plans to service all significant segments of the fine jewellery category by integrating Bevilles and launching its high-end bespoke brand, TenSevenSeven.
Jewellery retailer Michael Hill has reported record revenue of $ 629.6 million for FY23, a 5.8 per cent increase over FY22. Although gross profit improved 5.1 per cent over the previous financial year to $ 404.4 million, EBITDA dropped by 5.4 per cent to $ 78.7 million. Digital sales remained relatively flat at $ 41.3 million.
Michael Hill CFO Andrew Lowe attributes the profitability decrease to “higher cost of goods pressure, wage inflation in all three markets, and elevated New Zealand security costs”. He says that while the company delivered record revenue for the year, those results were driven by particularly strong first-half performance, followed by a “more challenging second half as macroeconomic conditions deteriorated and consumer confidence declined”.
Despite shifts in the consumer environment, the company intends to reposition itself at the top end of the jewellery market. Michael Hill plans to launch its new bespoke brand, TenSevenSeven, in October 2023. Michael Hill CEO Daniel Bracken says it will be “focused on servicing the high end of the market with its unique personalised diamond ring proposition.”
This strategic change may be partly due to the acquisition of Bevilles, which focuses on providing “great value beautiful jewellery for every occasion” at “affordable prices”. Bracken comments, “As the Michael Hill brand continues its aspirational brand journey to a more premium position, the acquisition of the Bevilles business in June provides a vehicle to take market share at the value end of the fine jewellery segment.”
Bracken continues, “The Bevilles business gives us the opportunity to capture market share at the value end of the fine jewellery category – currently a 26 store business, primed for a significant real estate expansion strategy”. All Bevilles team members, inventory, and stores have reportedly been transitioned to the Michael Hill group, which now totals 304 stores.
Between Michael Hill’s existing operations, the acquisition of Bevilles, and the intended launch of TenSevenSeven, the overall group seems to be targeting a much broader range of customers in the jewellery market. Bracken explains, “The Michael Hill Group now services all significant segments of the fine jewellery category and delivers multiple new growth pipelines.”
Customer loyalty has also been a key strategic driver for Michael Hill, with a focus on increasing average order value (AOV). Brilliance, the company’s membership program, now has over 2 million members. The company says Brilliance members show 34 per cent more transactions per customer, a 70 per cent higher average transaction value, and attribute around 82 per cent of total sales.
FY24 group sales are up 1.2 per cent on the prior year, though the company notes that for the core Michael Hill brand, “sales have continued the recent trend and are down on the record start to FY23”. Bracken adds, “There is no doubt that retail conditions have continued to be very challenging in all markets, with sales growth moderating as the group cycles record first-quarter sales in the prior year.”
Michael Hill plans to take advantage of new markets, channels, and service propositions, emphasising “unique differentiated product” offerings in the year ahead. Bracken says, “While inflation and rising interest rates have impacted consumer spending, I am confident that the group strategy has us well-placed to continue to take market share.”