Michael Hill delivers double-digit EBIT growth as Christmas trading turnaround takes hold
Michael Hill International Limited has reported a significant uplift in its trading update, with comparable EBIT anticipated to reach $27M to $30M, representing growth of +12% to +24% on the prior year’s $24.1M. The jewellery retailer’s preliminary results for the 26-week period ended 28 December 2025 signal operational momentum under new leadership, with Group sales reaching $370.3M (up +3.1%) and same-store sales growth of +3.8%.
The performance marks a material turnaround from earlier trading challenges, with CEO Jonathan Waecker highlighting that profitable quarter-on-quarter growth was driven by significant performance improvements in the final 10 weeks of the half. This improvement represents the first tangible validation of the operational discipline introduced since leadership change.
“Under new leadership, the Group delivered profitable quarter-on-quarter growth, driven by significant performance improvements in the final 10 weeks of the half, resulting in a materially improved trading trajectory relative to the early FY26 trading update presented at the October AGM,” said Jonathan Waecker, CEO of Michael Hill International Limited.
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Sales growth returns across all three markets
All three geographic segments contributed positively to the half-year result, with Canada achieving another record sales performance, Australia delivering strong sales performance, and New Zealand reversing previous same-store sales declines. The broad-based improvement demonstrates execution gains across the Group’s 285-store network rather than isolated regional strength.
| Market | Currency | Same-Store Sales Growth | Total Sales Growth | Commentary |
|---|---|---|---|---|
| Australia | AUD | +4.8% | +2.4% | Strong sales performance |
| Canada | CAD | +6.1% | +6.2% | Another record sales achieved |
| New Zealand | NZD | +1.8% | +2.4% | Reversed previous declines |
The consistency of positive contributions across all markets suggests the turnaround is driven by company-wide execution improvements rather than favourable conditions in specific geographies. Canada’s +6.1% same-store sales growth in local currency represents particularly strong momentum given it follows previous record performances.
Margin protection despite gold price headwinds
Group gross margin is expected to be broadly flat to the prior year at approximately 61.3% for the half, despite record-high gold, silver, and other metal input costs. Management credited enhanced overall product mix and focused promotional activity for offsetting material cost pressures during the period.
The ability to maintain margin while growing sales profitably through a period of significant input cost inflation demonstrates pricing discipline and category management skill. This margin protection indicates the earnings improvement stems from operational execution rather than aggressive discounting to drive volume.
Understanding jewellery retail margins and working capital
Jewellery retailers operate in a capital-intensive environment due to the requirement to hold substantial inventory of precious metals, diamonds, and finished pieces. This inventory ties up significant working capital, with the cost of funding stock representing a material expense line for retailers.
When a jeweller can reduce inventory levels while maintaining or growing sales, it signals improved buying discipline and faster stock turn rates. Faster inventory turn means less capital is locked up in unsold stock, reducing both financing costs and the risk of holding obsolete or out-of-season pieces.
Cash freed from inventory reduction flows directly to the balance sheet, either reducing debt or building cash reserves. For (ASX: MHJ), the approximately $11M inventory reduction (from $214M to approximately $203M) contributed meaningfully to the $30M swing in net cash position.
Balance sheet swings to net cash as working capital improves
The Group reported approximately a $30M improvement in its net cash position during the half, moving from $10M net debt at the end of FY25H1 to approximately $20M net cash at 28 December 2025. The improvement was driven by disciplined working capital management alongside profitable sales growth.
Key balance sheet developments included:
- Closing net cash position: approximately $20M positive
- Prior year comparative: $10M net debt
- Total improvement: approximately $30M swing
- Inventory reduction: approximately $11M (from $214M to approximately $203M)
- Debt refinanced with ANZ and new lender CBA for additional two years on improved margins
The refinanced debt facility with long-term banking partner ANZ and new lender Commonwealth Bank provides additional financial flexibility. Moving from net debt to net cash reduces financial risk and provides optionality for growth investment, particularly important for discretionary retail navigating uncertain economic conditions.
Store network refinement continues
The company advanced its strategy of investing in flagship locations while rationalising underperforming stores during the half. Three flagship store openings and refurbishments were completed, incorporating the Group’s new brand design and modernised in-store customer experience.
Flagship openings: Rundle Mall Adelaide (refurbishment), Bondi Junction Sydney (new store), Yorkdale Toronto (refurbishment)
Michael Hill network: 248 stores (AU: 123, NZ: 43, CA: 82)
Bevilles network: 37 stores (unchanged)
Total Group network: 285 stores (down from 287 at FY25H2)
The quality-over-quantity approach aligns with the profitable growth strategy, with resources directed towards high-traffic locations and elevated store experiences rather than network expansion for its own sake.
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Upcoming catalysts and investor engagement
The company has scheduled key dates for investor engagement on the full FY26H1 results and medium-term strategy:
- Half-year results release: Friday 27 February 2026
- Investor briefing webcast: Monday 2 March 2026, 7:30am Brisbane time
- Investor Day: Tuesday 14 April 2026, Cannon Hill QLD
The scheduled Investor Day at the Group’s global headquarters in Brisbane suggests management is building towards a more detailed strategic update. Investors should watch for medium-term guidance, capital allocation priorities, and further detail on operational initiatives driving the improved performance.
What this means for MHJ investors
The trading update validates early signs that new management is executing a credible operational turnaround. The combination of sales growth across all markets, margin protection despite input cost headwinds, and material balance sheet improvement represents quality earnings growth rather than short-term cost-cutting measures.
The EBIT improvement of +12% to +24% stems from both top-line growth (+3.8% same-store sales) and operational discipline (maintained 61.3% gross margin, approximately $11M inventory reduction). The final 10 weeks of the half showed particularly strong momentum, suggesting improved execution is gaining traction rather than fading.
The upcoming investor briefing on 2 March 2026 will provide further detail on the sustainability of this performance trajectory and management’s medium-term outlook. The return to net cash and refinanced debt facility provide financial flexibility as the company continues its turnaround strategy under CEO Jonathan Waecker’s leadership.
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