How Did Michael Hill Achieve Up to 24% EBIT Growth in FY26H1?
Michael Hill International reports a solid first half for FY26, with EBIT growth of 12-24% and a positive net cash position, driven by improved sales and operational discipline.
- Comparable EBIT expected between $27m and $30m, up 12-24% year-on-year
- Group sales increased 3.1% to $370.3m, with same store sales up 3.8%
- Inventory reduced by $11m to $203m, enhancing working capital efficiency
- Debt facility refinanced with better terms, net cash position improved by $30m
- Store network adjusted to 285 with new flagship openings and selective closures
Michael Hill’s Financial Momentum Builds
Michael Hill International Limited has delivered a promising trading update for the first half of fiscal year 2026, signalling a return to stronger profitability and operational efficiency. The jewellery retailer anticipates comparable earnings before interest and tax (EBIT) to land between $27 million and $30 million, marking a significant 12% to 24% increase compared to the same period last year.
Group sales rose modestly by 3.1% to $370.3 million, with same store sales climbing 3.8%. This growth was underpinned by robust performances across its key markets – Canada led with a 6.1% increase in local currency same store sales, Australia followed with 4.8%, and New Zealand reversed previous declines with a 1.8% uplift. These figures suggest that Michael Hill’s strategic focus on customer engagement and product mix is resonating well across diverse markets.
Margin Stability Amid Cost Pressures
Despite record-high prices for gold, silver, and other metals, the group managed to maintain gross margins broadly flat compared to the prior year’s 61.3%. This was achieved through a combination of an enhanced product mix and targeted promotional activities, demonstrating effective cost management and pricing strategies in a challenging input cost environment.
Inventory levels were deliberately reduced by approximately $11 million to $203 million, reflecting a disciplined approach to working capital. This reduction not only improves cash flow but also indicates a more efficient stock management system, which is critical in retail sectors sensitive to fashion and consumer trends.
Strengthened Balance Sheet and Store Network
Michael Hill successfully refinanced its debt facility with improved margins and extended terms, partnering with long-term lender ANZ and introducing the Commonwealth Bank of Australia as a new lender. This refinancing contributed to a positive net cash position of around $20 million at the half-year mark, a $30 million improvement from the previous year’s net debt of $10 million.
The company also continued to refine its store portfolio, closing three stores while opening three flagship locations, including refurbishments in Adelaide and Toronto and a new store in Sydney’s Bondi Junction. The total store count now stands at 285 globally, reflecting a strategic balance between expansion and consolidation to optimise market presence and customer experience.
Leadership Driving Operational Discipline
CEO Jonathan Waecker highlighted the impact of new leadership and sharper execution focus, particularly during the critical Christmas trading period. He emphasised how improved operational discipline, leadership alignment, and a motivated team have contributed to the company’s improved trading trajectory and profitability. The company plans to provide further insights at its upcoming investor briefing in March and an Investor Day in April, signalling confidence in sustaining this positive momentum.
Bottom Line?
Michael Hill’s disciplined execution and financial prudence set the stage for continued growth, but market dynamics and cost pressures remain key watchpoints.
Questions in the middle?
- How will Michael Hill sustain margin stability amid ongoing metal price volatility?
- What strategic initiatives will the company unveil at the upcoming Investor Day?
- Can the positive cash position support further store expansion or innovation investments?
