The company’s chief executive officer, Mike Parsell is not concerned about the recent closure of stores in the US.
In fact, Parsell says that the company still plans to open 15 new stores this year with, “the bulk being in Australia” adding, “we will also have new stores in New Zealand and plan to expand into Canada.”
After returning from the US last week, Parsell told Jeweller that although he was not happy that the company was forced to close the eight US stores, the decision was not solely caused by the global financial crisis.
“When we acquired the 17 Whitehall Jewellers in July 2008, the crisis had already begun, and in fact, that was one of the reasons why Whitehall went in Chapter 11 bankruptcy protection. We acquired the stores for ‘cents in the dollar’ or for just the cost of inventory, so our investment in the US and any ‘loss’ in closing the stores is not large,” Parsell explained
Indeed, by not paying any goodwill in the Whitehall purchase, Parsell partially explains the recent closures as the cost to enter and test the US market to establish if the Michael Hill business model could be successful there.
News reports at the time said that Michael Hill paid as little as 80 cents in the dollar for stock to acquire the business.
Parsell is responsible for spearheading the company’s move into Australia in 1987 and has extensive experience in the jewellery industry dating back to 1976. He joined Michael Hill in 1981 and was appointed to the Board in 1989, made joint managing director in 1995 and CEO in 2000.
Parsell also pointed-out that when an opportunity to acquire a business which is in liquidation or bankruptcy (the legal term in the US) “you don’t have a lot of time to undertake extensive due diligence. The opportunity can come and go in a very short window, so you need to act quickly”, he said.
The Chicago-based Whitehall filed for Chapter 11 bankruptcy protection in June, 2008 and two months later the liquidation sales began at all 373 of its stores in 39 states. At the time Whitehall ranked as the fifth-largest North American retailer by store count and Michael Hill concentrated on the 17 stores in the Chicago area.
It was after the deal was finalised in late August, 2008 that Michael Hill began assessing whether its retail formula could work in North America.
“In the US, large shopping malls are very different to Australia. For a start, they don’t have supermarkets of discount department stores, so we have been assessing how our Australian and New Zealand model will work in the US,” Parsell said.
He added that he was most confident with the nine remaining stores and they will be fully capitalised with store refurbishments taking place. “Some of the malls that the (closed) stores were in were simply not right for our business model,” he explained.
Parsell would not confirm where and when the new stores would open in Australia and New Zealand but stressed that the US closures would not impact its core markets.
More reading: Michael Hill closes stores
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