Overview

Michael Hill International Ltd reported a record full‑year FY 2026 revenue of AUD 655.7 million, representing a 4.1% increase in constant currency and a 1.9% rise in Australian dollars. Same‑store sales grew 5.2% on a constant‑currency basis and 3.0% in local currency across Canada, Australia and New Zealand. The company highlighted a turnaround that accelerated in the second half of the year, with all three markets delivering growth.

Financial Highlights

Revenue reached AUD 655.7 million, while gross profit rose 1.9% to AUD 397 million, keeping the gross margin flat at 60.5% year‑on‑year. Comparable EBIT climbed 57% to AUD 24 million, translating to a 3.7% EBIT margin, an improvement of 130 basis points. Statutory net profit after tax was AUD 10 million, up from the prior year. The cost of doing business fell 70 basis points to 57.1% of revenue, reflecting disciplined expense management in an inflationary environment. Inventory decreased by AUD 9.4 million to AUD 189.7 million, and inventory productivity (GMROI) improved 13% year‑on‑year. Net debt was reduced dramatically to AUD 5.5 million, a decline of AUD 36.3 million from AUD 41.9 million the previous year.

Balance‑Sheet Strength

The balance sheet showed a substantial debt reduction, providing liquidity ahead of the seasonal inventory build for Christmas. Trade and other payables rose due to favourable supplier terms and higher deposits for custom orders. The right‑of‑use liability fell by AUD 3.2 million to AUD 16.7 million, mainly because of store closures. Intangible assets were written down, including a non‑cash write‑off of AUD 6.1 million linked to the closure of Medley and Ten SevenSeven, which were excluded from comparable EBIT.

Capital Allocation and Store Network

FY 2026 capital expenditure totaled AUD 19.7 million, below the higher spend levels of FY 2022‑2024, with a shift from technology to store fit‑outs. Fourteen stores were built or refreshed, including four flagship locations, and the overall store count fell by six to 281 stores at year‑end (157 in Australia, 81 in Canada, 43 in New Zealand). The company plans FY 2027 capital spending of approximately AUD 25 million, up from AUD 19.7 million, to fund store refreshes, inventory planning tools, and AI‑enabled projects.

Segment Performance

  • Australia (including Bevilles): Revenue of AUD 372 million, up 2.5%; same‑store sales up 4.8%; comparable EBIT rose 34.4% to AUD 36.3 million; gross margin improved to 60.7% (+130 bps). The network finished with 157 stores, including 36 Bevilles locations, and saw flagship openings and refurbishments in Sydney and Adelaide.
  • Canada: Revenue of CAD 174 million, up 7.3%; same‑store sales up 7%; comparable EBIT increased 16.3% to CAD 21.9 million; gross margin improved to 60.3% (+20 bps). Online sales grew 22% and flagship stores were opened in Toronto’s Yorkdale and Vancouver’s Pacific Centre. The store count ended at 81, with a target footprint of 85‑90 stores.
  • New Zealand: Revenue of NZD 112 million, up 3.1%; same‑store sales up 3.6%; comparable EBIT rose 2.4% to NZD 14 million; gross margin was 58%. Two stores closed, leaving 43 stores, with a flagship relocation in Auckland and a new store planned for the first half of FY 2027.

Strategic Initiatives

The turnaround focuses on “making modern luxury accessible.” Key actions include: expanding the loyalty program to 3.3 million members (gross profit from members up 14%); growing the Made‑For‑You custom and personalized range to over 15% of sales; launching AI‑driven Retail Assist across stores, now handling over 50% of retail support queries; partnering with Impact Analytics to implement AI‑based demand forecasting in the second half of FY 2027; and investing AUD 25 million in store refreshes and SaaS projects.

Governance Changes

Chairman Rob Fyfe announced his retirement effective 28 November 2026, with Non‑Executive Director Claudia Batten slated to succeed him. Two new Non‑Executive Directors, Karen Bozic and Mark Bayliss, were appointed to strengthen board expertise in retail, transformation, audit and risk.

Outlook & Guidance

Management expects FY 2027 gross margin to be flat to slightly higher, with cost of doing business remaining flat or modestly lower than FY 2026. Revenue growth is projected around 3% by InvestingPro analysts, with EPS guidance of approximately $0.04. Capital expenditure is forecast at AUD 25 million, up from AUD 19.7 million, supporting store refreshes, AI‑enabled inventory planning, and continued digital investments. The company reaffirmed its medium‑term EBIT margin target of at least 10% within 3‑5 years.

Market Reaction

Following the earnings release, Michael Hill shares rose 2.04% to $0.35, trading about 16.7% above the 52‑week low of $0.30 and 26.3% below the 52‑week high of $0.475. The stock’s P/E ratio stood at 18.4, and InvestingPro listed the shares among its “Most Undervalued” stocks.

Risks & Challenges

The company highlighted promotional pressure in Australia and New Zealand, record‑high gold and silver prices compressing gross margin, ongoing turnaround risk with thin profitability, elevated security costs in Canada (now improving), and the need for disciplined execution of planned store, inventory and technology investments.

Q&A Highlights

Analysts asked about Australian trading trends; management confirmed continued growth in Australia and Canada, noting a 22% online sales increase in Canada and a 9.8% local‑currency same‑store sales rise in Canada during the first eight weeks of FY 2027. On profitability guidance, CFO Elodie Guillaumond said gross margin is expected to be flat to slightly higher and cost of doing business to remain flat or modestly lower.

Conclusion

FY 2026 marked a significant step forward for Michael Hill, delivering record revenue, universal same‑store sales growth, a 57% EBIT increase, a dramatically stronger balance sheet, and the reinstatement of a dividend. The company remains focused on executing its turnaround strategy, expanding digital and AI capabilities, and delivering profitable growth in FY 2027.