The company temporarily shut down its 301 stores in Australia, New Zealand and Canada in March as the COVID-19 pandemic spread.
On 16 May, 100 Australian stores and 25 New Zealand stores returned to trade while adhering to new safety protocols. Canadian stores will recommence trading from late May, subject to government restrictions and directives.
While the reopenings are a positive sign for the business and its 2,500 employees, a statement from Michael Hill International confirmed that five Australian stores, three New Zealand stores and one Canadian store will remain closed.
“The company still anticipates an ongoing impact on revenue and profitability due to the uncertainty of the economic landscape.
"Accordingly, we have been negotiating with all our landlords to reach reasonable commercial arrangements that reflect the reality of the consumer marketplace and trading conditions,” the statement explained, adding, “Further store closures are likely across all markets, based on store performance and the outcome of landlord negotiations.”
Indeed, retail landlord negotiations have come into sharp focus amid the COVID-19 crisis. Solomon Lew’s Premier Investments – Australia’s largest retail tenant, operating 900 stores across brands including Smiggle, Just Jeans and Peter Alexander – declined to pay rent for six weeks while its stores were closed to contain the spread of the virus.
It has since negotiated to only pay a gross percentage of store-based sales, in arrears rather than in advance, until trading returns to pre-coronavirus levels.
Mark McInnes, CEO Premier Investments, told The Age, “Some landlords understand that we're in the middle of a global health crisis that we haven't seen since the Spanish Flu. They're understanding and they're realistic. But there are other landlords with their heads in the sand, telling their investors nothing has changed and trying to hold up historical valuations built on pre-COVID-19 trading patterns which just no longer exist.”
He added, “[Store] networks shrinking is really up to the landlords. There's no reason to shut a store, the only reason we shut stores is because the rent makes that store unprofitable.”
Increase in digital sales
During the temporary shutdown period, Michael Hill International reported a “significant boost” in sales through its ecommerce platforms, with its previous digital sales record – set during the Christmas 2019 trading period – broken during the three weeks to 14 May.
The company attributed the results to a number of new features and initiatives, including ‘virtual appointments’, a video content hub, a mini store launched on the WeChat app, shoppable Instagram posts, and a ‘proactive’ chat feature introduced on its websites.
Daniel Bracken, CEO Michael Hill International, said, “The surge in our digital sales signals a notable shift in consumer behaviour in the jewellery category. We have been quick to respond and harness this opportunity, with the implementation of a number of digital initiatives to continue to attract new customers and maintain the momentum.
"I’m very proud of the agility of our team to roll out so many digital initiatives in such a short period of time.”
He added, “The next six months and beyond will continue to be challenging, however, we are well-placed in each market to emerge as a strong and more relevant jewellery brand.”
In April, the company implemented a new 'lean' operating model including reductions to executive and board member salaries, the suspension of repayments to underpaid employees, a review of corporate structure and support staffing, deferral or cancellation of store expenditure, and returning or repurposing inventory.
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