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A transitional period and challenging market conditions have taken the sparkle out of Michael Hill's (ASX: MHJ) FY19.
Group operating revenues were down slightly to $569.5 million while underlying earnings also dropped 13.7 per cent to $34.6 million.
Michael Hill's FY18 net profit result was adjusted down to $1.6 million to account for remediation and backpay costs to employees of up to $25 million. This is the main reason why FY19 profits increased to $16.5 million.
CEO Daniel Bracken says although the group isn't happy with its financial performance, steady sales look promising despite a challenging retail environment.
"Whilst we are disappointed with the financial result, we have finished the year with positive sales momentum and reduced inventory," says Bracken.
"The pace of change has been intense this year with a greater sense of urgency and determination to deliver, which is really infectious."
"I'm proud that we have been able to improve sales momentum despite challenging trading conditions in our key market."
Michael Hill opened ten new stores and closed eleven underperforming locations during the year.
The company also shifted away from its aggressive discounting strategy which, in the short term, lessened same store sales by 3.3 per cent to $524.7 million.
However, the move is expected to have long term benefits.
Michael Hill says there is no indication the Australian retail environment will improve in FY20, but the company is nevertheless focused on improving its in-store retail experience, creating new products, managing a strong property portfolio and continuing to grow revenue.
"I'm confident in the coming year we are well positioned to deliver improved performance as our new operating model gathers pace, new product is introduced and our investments in our digital and IT infrastructure start to bear fruit," says Bracken.
"The focus will continue to be on retail fundamentals and strong execution in store and online."
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