Why the Michael Hill (ASX:MHJ) share price is leaping 11% higher

The rocketing Michael Hill International share price is one to watch today following on the company's trading update this morning.

| More on:
hand on touch screen lit up by a share price chart moving higher

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Michael Hill International Ltd (ASX: MHJ) share price surged up 11% at market open today following the company's positive trading update this morning.

Like most brick and mortar reliant retailers, Michael Hill's shares were smashed during the COVID-19-driven market rout earlier this year, falling 69% from late January through to mid-April.

Since the 8 April low, shares have rocketed 161% higher. However, that's still not quite enough to recover the losses from earlier in the year, with the share price down 14% year-to-date.

In comparison, the broader S&P/ASX 200 Index (ASX: XJO) is up 2% since 2 January.

What does Michael Hill do?

Founded by Sir Michael Hill in 1979, Michael Hill International is a specialist retail jewellery chain, headquartered in Brisbane.

The company sells jewellery and related services. It operates 289 stores in Australia, New Zealand and Canada. The group derives its prime revenue from Australia.

What's driving the Michael Hill share price up?

In this morning's interim trading update for the 22-week period ending 29 November, Michael Hill reported growth in both same store sales and gross margin.

Same store sales increased 7.9% compared to the same 22-week period last year, while same store sales in October and November were up 8.5% year-on-year.

The company reported a significant rise in sales across all of its markets. And in a trend mirrored by most ASX retail shares, it reported a huge lift in online sales, up 110% compared to the same 22-week period in 2019.

Noting 14 of its Canadian stores are temporarily shuttered due to virus control measures, Michael Hill cautioned that it is still concerned potential new virus outbreaks and lower instore foot traffic could impact its first half earnings.

Still, the company forecasts it will likely deliver earnings before income and tax (EBIT) in the first half of the 2021 financial year "materially exceeding" the prior year half one result of $31.6 million.

Commenting on the trading update, Michael Hill's CEO Daniel Bracken said:

Across all channels and segments, the company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter. In addition to this impressive top line performance, the company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position.

Bracken added that "the two weeks of trade leading up to Christmas are critical" for the company, and it's keeping a close eye on evolving COVID-19 restrictions in Canada.

The Michael Hill share price has since retreated slightly to 58 cents, up 7.4%, at the time of writing.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Firefly, Kelsian, NAB, and Zip shares are roaring higher today

These shares are having a good time on hump day. Let's find out why.

Read more »

A man and woman sit at a desk staring intently at a laptop screen with papers next to them.
Opinions

Where I'd invest $5,000 in ASX 300 shares right now

These stocks look like excellent investments today.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Goldman Sachs says these ASX 200 stocks are strong buys

The broker is feeling very bullish about these stocks. But why?

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Wednesday

Here's what to expect on the local market today.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another tough day for investors this Tuesday.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why HMC Capital, Platinum, Sigma, and Skycity shares are dropping today

These shares are having a tough session on Tuesday. But why?

Read more »

A close-up photo of a ballot box with an Australian flag in front of it and a gentleman's hands placing his vote in the 2022 election inside the box
Share Market News

How these ASX 200 stocks are primed to gain from Labor's resounding Federal election win

With the Federal election in the rear-view, which ASX 200 stocks should I buy now?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Dimerix, Evolution Mining, Inghams, and NextDC shares are charging higher today

These shares are rising when many are falling today. But why?

Read more »