MICHAEL HILL INTERNATIONAL LTD (MHJ) - The Next Steps For Sustainable Growth Artwork

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MICHAEL HILL INTERNATIONAL LTD (MHJ) - The Next Steps For Sustainable Growth

September 04, 2026 • Andrew Musgrave

0:00 | 11:51

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ASX Investment Opportunity - Michael Hill International Ltd (ASX:MHJ)

Gold prices keep pushing higher, currencies swing, and consumer spending stays selective, yet Michael Hill International is finding ways to grow. We’re joined by CEO Jonathan Waecker to talk through why he calls FY26 the beginning of a turnaround, not the end, and what has to be true for the market to trust the next phase. We get specific on the levers behind the numbers: same store sales growth across markets, stronger EBIT, lower net debt, and the push for sustainable momentum rather than a single strong year.

We also unpack how a jewellery retailer defends gross margin when precious metals hit repeated record highs, and why Jonathan believes customers will still pay when value is clear. From there, we go market by market: Canada’s record performance and the way stores and e-commerce reinforce each other, Australia’s ability to lift sales and margin without needless discounting, and New Zealand’s rebound driven by sharper value and the right range across key categories like bridal, solid gold, and diamond fashion.

The conversation turns to execution and focus. Jonathan explains the Bevilles reset, the decision to simplify the brand portfolio so more energy goes into the core Michael Hill brand, and the size of the online opportunity with digital penetration still well below global peers. We finish on capital allocation, transparency between constant currency and AUD reporting, and the single metric he most wants to move over the next 12 months: EBIT.

If you found this useful, subscribe to ASX Briefs, share the episode with a mate who follows retail and the ASX, and leave a review with your take on what makes a turnaround truly stick.

Andrew Musgrave

Welcome back to ASX Briefs. And joining me today is Jonathan Waecker, the CEO at Michael Hill International Limited. The Michael Hill Group is a market-leading jewellery retailer with a portfolio of brands operating a network of over 300 stores across Australia, New Zealand, and Canada with multiple international digital platforms. Jonathan, great to have you with me today and welcome to the ASX Briefs Podcast.

Jonathan Waecker

Thanks so much, Andrew. Great to be here.

Andrew Musgrave

Now, Jonathan, plenty happening with the company at the moment so we can touch on the results. This time last year, the market was still waiting to see if the turnaround would hold. Twelve months on, comparable EBIT is up 57% and the dividend is back – what’s one operational change you’d point to that’s driven that swing?

Jonathan Waecker

I think at the simplest, I say we listen to customers, right. We simplified the business, we listened to what customers were telling us and we got back to showing up for them in a way that we most need to.

Andrew Musgrave

And you've described FY26 as the beginning of a turnaround rather than the end of it. What does the business still need to fix that the market isn't necessarily seeing in these numbers?

Jonathan Waecker

I think we've made some changes that have given us early results. And I'm pretty pleased with kind of the broad swath of improvements we've seen. Same store sales growth across every market, margin improvement, obviously the profit improvement you mentioned at the top, 57% up in EBIT, the net debt is down, our inventory is more productive. These are all really great things. And the sum of those parts gets us to a really great spot. But it's been one year, and we're really focused on sustainable growth. We're focused on getting back to sustainable return to dividend. I'm really pleased that year one had a dividend return, but I want to see us do more. And I really want to see us focus on making the Michael Hill brand the focus of our growth.

Andrew Musgrave

And gross margin held flat at 60.5% despite gold hitting repeated record highs. How much harder was that to defend than the headline number suggests? And what gives you confidence it holds if gold keeps climbing?

Jonathan Waecker

Well, when I think about the business over the past couple of years, and you know, I'm a first-time CEO in the category of jewellery, and so I've been learning a lot over the last 12 months from the team. And what I can see is that gold has hit record highs almost every year for the last three years. And every time the team has been able to successfully influence and pass that on to customers in ways that are really accretive. So, I have confidence that we've been doing it year on year on year, not just last year. And so, as there's continued volatility in the precious metals category, we'll be able to pass those costs on as they show up because customers do see value in things that are worth more.

Andrew Musgrave

Turning now to the segment performance, Canada delivered another record year with same store sales up 7% and online growth of 22%. What's made Canada the standout? And is that a market opportunity or an execution story you can replicate elsewhere?

Jonathan Waecker

I look, Canada is definitely one of the pride points of the business at the moment, and I can't thank that team enough for continuing to deliver record on record. There are really three things for me when I zoom out. Number one is that team is performing really at their best each and every day. All of our teams are, but in Canada, they are really knocking it out of the park, which is really impressive. Number two, we've actually got the footprint now that really gives us full coverage in that market. 81 stores, we want to grow to about 85. So, we're really close to having the saturation we need from a footprint point of view. But number three, we're also seeing the benefit of having a really strong online business alongside a really strong store footprint. About 65% of our sales show up in store, and we grew online sales 22%. So, a lot of that growth shows up across the footprint, and that's a self-reinforcing curve when we get it right.

Andrew Musgrave

And Australia grew same store sales 4.8% and lifted gross margin 130 basis points at the same time. Usually, you're trading one off against the other. So how did you manage both?

Jonathan Waecker

Well, I think when we started the year last year, we really looked at how do our markets need to go differently for each consumer group. So, what needs to be true for Australian consumers actually different than a New Zealand consumer is different for Canada. And so, what you're seeing in those Australian results is actually us going to market in Australia with the things that matter most to the Australians who are shopping with us. And that means not unnecessarily promoting where we don't need to, and also making sure that we're showing up with the right product market fit and the right value for money where it makes sense. So, I'm really pleased that that we're getting that balance right. We're not giving away a necessary margin, while also giving ourselves permission to show up perhaps in a more promotional sense in a market like New Zealand where promotions are more important.

Andrew Musgrave

Lastly, New Zealand's second half acceleration to 5.6% same store sales growth stands out against a softer first half. What changed at the halfway point?

Jonathan Waecker

Yeah, I think probably two things really, really did show up for the Kiwi consumer. Number one, we got back to demonstrating value throughout the range. As I mentioned before, Kiwi consumers really are savvy when it comes to what good value for money means. And it's really important that we have the right products at the right price points for them. And over the last couple of years, I do think we didn't have the right offering for the full bell curve of the New Zealanders who shopped with us. We have a footprint that, you know, we have one store for every 100,000 Kiwis, give or take. So, it's really important that we have the right product market fit. And I don't think we got that right. We got back to that this year. The second thing is we really doubled down on the products that were new and really innovative in New Zealand, and we really focused on the things that Kiwis were shopping us for, things like bridal, things like solid gold, and things like diamond fashion.

Andrew Musgrave

And looking at the Bevilles reset, which went from a 4.6% same store sales decline in the first half to a 5.8% growth in the second, with gross margin up 660 basis points between the halves. So, talk us through what actually changed in that business over the past six months.

Jonathan Waecker

Yeah, so going into Christmas, we made three big changes. We changed the leadership, we changed our go-to-market, and we changed our pricing strategy. And those three things really helped us get back to really what Bevilles was at the beginning. You know, Bevilles is a brand that's all about the look for less. This is a value-driven consumer looking for that perfect piece and not wanting to splash a lot of cash for it. But they still want quality, they still want craftsmanship, and they still want, you know, high quality gold and silver. We got back to that fundamentally and fixing that go-to-market, fixing that promotional cadence, and really aligning the culture of the team around what made that brand great to begin with was really what changed. Seeing that happen over the second half is what drove that improvement you just talked about. And what's really pleasing is we're seeing that continue in the first eight weeks of the year. And I'm really excited to see what that brand can do going into Christmas.

Andrew Musgrave

Now, from a strategic simplification perspective, you closed Medley and TenSevenSeven as part of the simplification announced at April's Investor Day, taking a $6.1 million non-cash write-off. What did that decision teach you about where the group's resources were being spent before?

Jonathan Waecker

Yeah, you think about any portfolio brand that gets seduced by a multi-brand strategy. It's not that it's right or wrong, it's just it's hard. And you really have to acknowledge that each of those brands requires its own investment, its own capital, its own attention, its own team. And sometimes that makes sense. But when I was looking at this business, what I realized was we weren't spending enough time on the crown jewels, and we certainly weren't spending enough time on the biggest jewel of them all, which is Michael Hill. And so, it became a really simple decision that we actually need to stop focusing on the brands that aren't delivering us any value. We need to learn from them because there's a lot of really great lessons in each of them. In particular, TenSevenSeven taught us how to do bespoke jewellery quite well and what that could mean to a customer when we got it right. But we need to take that experience and extend it across the entire Michael Hill network. We have 250 plus stores around the world that we could push that brand experience into. And that's infinitely more powerful than having a standalone brand that requires its own scaffolding.

Andrew Musgrave

And online now makes up 8.7% of total sales and grew 10% in Michael Hill on a constant currency basis, well ahead of the physical network. So how far below your peers is that penetration and what's the ceiling?

Jonathan Waecker

Look, on the one hand, I'm really pleased that the team was able to show us that growth was possible, and 10% growth is quite admirable given the context. At the same time, 8.7 is nowhere near where I think we should be. We have peers that are as high as 20 to 30 percent, depending on their geographical context. So bluntly, I think 2 to 3x is the target we should be aiming for.

Andrew Musgrave

Now, touching on the financials, net debt has improved by 36.3 million to 5.5 million, and the board has restored a partially franked two cent dividend. How does the board think about the balance between further deleveraging, reinvestment, and return to shareholders from here?

Jonathan Waecker

I think that there's a couple things in that question. First and foremost, I couldn't be more pleased with the health of the balance sheet. You know, you think about a broad-based recovery, we're not just talking about sales and margin improvement. We're not just talking about culture improvement. We're also talking about a balance sheet that has gotten quite a bit stronger, both from a working capital point of view and a debt point of view. At the same time, we're thinking a lot about product productive growth and profitable growth. And sometimes that means investing in the right inventory in the right place. So, while our inventory is down to 189.7 this last year, we do think we'll probably grow in another, let's call it, single-digit millions going into the next year to make sure that we're funding profitability in the right way. From a board perspective, I can give you, my view. Obviously, the board has theirs and we share it, is that we're trying to get back to sustainable growth and sustainable dividend. That means we need to build a flight path that has repeatability in it and consistency in it. You know, I fully believe that repetition is reputation, and we need to get back to having a business that people can confidently bet on. So, that's the plan. That's what we're doing, and we hope to go from here.

Andrew Musgrave

Looking ahead, group same store sales are up 4.4% on a constant currency basis through the first eight weeks of FY27, though flat in AUD. What's driving that currency gap? And should investors be watching AUD or constant currency numbers most closely this year?

Jonathan Waecker

We're very specific that we shared constant currency this year because we didn't want to hide the underlying momentum in markets like Canada and New Zealand. I mean, the real challenge in this moment is that the AUD is quite strong, and that's being driven by a lot of macroeconomic impacts outside of our control. At the same time, over you know, in the fullness of time, I'm sure that trend will change, and the AUD might perhaps weaken and the Canadian might get stronger. And so, we'd also don't want to imply that this is a one-way conversation by any means. So, we thought the most transparent thing we could do was help investors understand both sides of that story. Number one, how are the markets performing in their own right? So, you have Canada, you know, up 9.8%. You know, the overall market's up 4.4% when you look at constant currency. And that translates down to effectively flat an AUD. And that just shows you how strong that AUD is versus that constant currency rate. But that's not forever, and it's something we manage as well. But we're not prioritizing one over the other. And if anything, I'm focused on making sure the markets are performing under their own steam.

Andrew Musgrave

Finally, Jonathan, if we're back here in 12 months' time talking about the FY27 results, what's the one metric you most want to have moved?

Jonathan Waecker

Ooh, it's a good question. I mean, EBIT ultimately, because that's what enables me to pay dividends. That would imply strong same store sales growth. That would imply we got our CODB and gross profit dollars right and it would imply that we're growing profitably in every market. So, I would say EBIT up.

Andrew Musgrave

Okay, Jonathan. Well, it's been great to speak with you today. So, thanks for joining me on the podcast, and we look forward to further updates in the upcoming months.

Jonathan Waecker

Amazing. Thanks so much, Andrew. Really appreciate it.

Andrew Musgrave

That concludes this episode of ASX Briefs. Don't forget to subscribe, and we look forward to catching you on our next episode.