Listed jeweller Michael Hill International has suffered challenging trading conditions in its largest market, Australia.
In a market briefing, chairman Sir Michael Hill said the Australian operation experienced a small drop in "same-store" sales in the six months ended December 21.
"The difficult market in Australia also put pressure on our margins during the second quarter, which will adversely impact on profits for the half year," he said.
However, despite the difficult trading in Australia during the period, the group's cash flow remained strong for the half year and the success of its professional care plan since its launch in October 2010 was encouraging. The retailer collected $14.4 million in revenue from its plan, with $1.5 million brought to income for the half year.
The plan provides for maintenance and care of jewellery.
Same-store sales in Australia declined 0.5% to $177.4 million in the period. In New Zealand, same-store sales rose 9.9%, while in Canada they rose 2.1% and 16.4% in the US. The company said total sales for the six months to December were $287.7 million, a 7.2% increase on the prior comparable period.
The company said half-year earnings before interest and tax were expected to be in the range of $33 million to $35 million, compared with $32.3 million in the corresponding period last year. The full half-year results will be released on February 16.
Forsyth Barr broker Suzanne Kinnaird has an accumulate recommendation on MHI shares and values the company at $1.06 a share. Shares last traded at 87c.
"There were encouraging signs from New Zealand and North America with solid same-store sales growth," she said.
