How Is Michael Hill Steering Through Inflation and Leadership Change?

A Year of Challenges and Resilience

Michael Hill International Limited closed FY25 facing a familiar set of headwinds – subdued consumer demand across Australia and New Zealand, persistent inflationary pressures on key costs such as wages, occupancy, and gold prices, and a competitive retail environment marked by aggressive promotions. Despite these challenges, the company maintained revenue broadly flat at $644 million and earnings before interest and tax steady at $15.3 million, reflecting disciplined cost management and strategic focus.

Margins remained under pressure, but the company offset some of these impacts through a refreshed product mix featuring higher-margin offerings like the Pendant Bar and LAB diamond collections. The business also took decisive steps to optimize inventory and reduce capital expenditure, resulting in a stable balance sheet with net debt holding steady at $42 million.

Leadership Transition and Strategic Renewal

The year was marked by significant leadership changes, including the appointment of Jonathan Waecker as CEO, who took the helm with a clear mandate to sharpen the company’s strategic focus. The board also progressed its succession plan with the appointment of Claudia Batten as Deputy Chair, ensuring continuity and governance stability amid the transition.

Waecker’s early tenure has been characterized by a deep dive into operational fundamentals and a commitment to innovation. He highlighted the company’s omni-channel growth, with digital sales surpassing $50 million for the first time, and the opening of a second global flagship store in Melbourne, signaling a renewed emphasis on customer experience and brand elevation.

Embracing AI and Operational Efficiency

Michael Hill has positioned itself at the forefront of retail innovation by integrating artificial intelligence across multiple business functions. The establishment of an AI Centre of Excellence reflects a forward-looking approach to enhancing agility, insight, and customer engagement. This technological adoption complements ongoing efforts to refine retail fundamentals, optimize store productivity, and manage costs effectively.

Early Signs of FY26 Recovery

Trading in the first 16 weeks of FY26 shows encouraging signs, with a 100 basis point uplift in gross margin and a 2.4% increase in same-store sales during the second half of FY25 carrying through. Regional performance remains mixed – Canada continues to be a standout growth engine with a 4.1% sales increase, Australia shows modest growth, while New Zealand faces ongoing softness.

The company is well-prepared for the critical Christmas trading period, with new product launches, flagship store refurbishments, and a strengthened gifting range designed to capture consumer interest and drive sales momentum.

Looking Ahead

While FY25 was a year of steadying the ship amid external pressures, Michael Hill’s leadership transition and strategic initiatives set the stage for a more dynamic phase of growth. The company’s focus on innovation, AI integration, and operational discipline will be key to unlocking future opportunities and enhancing shareholder value.