Highlights

  • H1'FY26 revenue increased 3.0% YoY to $371.0 million, with same-store sales growth recorded across all three operating markets.
  • Comparable EBIT rose 28.6% to $31.0 million, while statutory net profit after tax increased 32% to $22.3 million.
  • Gross margin remained broadly stable at 61.2%, indicating that earnings growth was supported by operating leverage and cost discipline.
  • Michael Hill moved to net cash of $20.7 million from net debt of $9.8 million a year earlier, a $30.5 million improvement.
  • Early H2'FY26 trading showed group same-store sales up 6.0%, including 13.0% growth in Canada.

Michael Hill International (ASX:MHJ) entered FY26 with a clearer earnings recovery taking shape across its jewellery retail portfolio.

For the six months ended 28 December 2025, the group reported revenue of $371.0 million, up 3.0% YoY, while comparable Earnings Before Interest and Tax (EBIT) increased 28.6% to $31.0 million.

Statutory net profit after tax increased 32% to $22.3 million.

The significance of the result lies in the gap between sales and earnings growth. Revenue increased modestly, yet comparable EBIT rose at a much faster rate, suggesting that changes to costs, store productivity, merchandising and working capital are translating into better operating leverage.

Sales also improved across Australia, Canada and New Zealand, giving the result a broader base than a recovery driven by a single region.

The next stage for Michael Hill is to determine whether those gains can be sustained through a discretionary retail environment still influenced by household budgets, gold prices and currency movements.

A Multi-Market Jewellery Retailer

Michael Hill traces its origins to New Zealand, where Sir Michael Hill opened the first store in 1979.

The group now operates across Australia, Canada and New Zealand through the Michael Hill brand and, in Australia, the Bevilles jewellery chain.

At the H1'FY26 reporting date, the group operated 285 stores.

That included 160 outlets in Australia, of which 37 were Bevilles stores, alongside 82 stores in Canada and 43 in New Zealand.

The product range spans engagement and wedding jewellery, diamonds, gold, branded jewellery and gifting.

The company also earns services revenue through offerings such as its Professional Care Plan.

Its strategy has increasingly focused on simplifying operations, refining product ranges and improving customer engagement rather than relying primarily on rapid store-network expansion.

That approach is important in a mature retail category where productivity per store and customer transaction can matter as much as opening additional locations.

H1'FY26 Sales Returned to Growth

Revenue increased 3.0% to $371.0 million in H1'FY26.

Same-store sales improved across all three markets.

This was an important change because recent periods had been affected by softer discretionary spending and uneven trading conditions.

Canada was a notable contributor.

First-half Canadian revenue increased 6.2% to CA$96.3 million, while same-store sales rose 6.1%.

The early second-half trading update provided additional evidence of momentum.

During the first eight weeks of H2'FY26, group same-store sales were running 6.0% higher, compared with 3.8% growth during the first half.

Canada accelerated further, with same-store sales increasing 13.0% during that early H2 period.

The figures suggest that the group entered the second half with broader sales momentum rather than relying solely on cost reductions to support earnings.

Comparable EBIT Increased Nearly 29%

Comparable EBIT rose to $31.0 million from the prior-period level, representing growth of 28.6%.

The company identifies this measure as unaudited and excluding AASB 16 and IFRIC software-as-a-service impacts.

The faster rise in EBIT compared with revenue is central to the H1'FY26 result.

It indicates that incremental sales are contributing more effectively to profit following changes to the cost structure and operating model.

Statutory net profit after tax increased 32% to $22.3 million.

Gross margin remained broadly stable at 61.2%.

That matters because the earnings improvement was not achieved through a material increase in gross margin or aggressive pricing.

Instead, the result points more clearly toward operating leverage, expense discipline and improved execution.

For a retailer with a substantial physical store network, maintaining margins while increasing profit faster than revenue is an important measure of progress.

Balance-Sheet Improvement Adds Flexibility

The balance sheet showed one of the clearest changes in the group’s financial position.

Michael Hill ended H1'FY26 with net cash of $20.7 million.

A year earlier, it carried net debt of $9.8 million.

That represents a $30.5 million improvement in the net cash position.

Working-capital management contributed to the shift.

Inventory declined by $11.3 million to $201.9 million.

For a jewellery retailer, inventory discipline is particularly important because substantial capital can be tied up in precious metals, diamonds and finished products.

Reducing inventory while still delivering sales growth indicates that the company was using working capital more efficiently during the period.

The stronger balance sheet also gives management more flexibility around store investment, dividends and other capital-allocation decisions.

Michael Hill did not declare an interim dividend, preserving financial flexibility during the recovery phase.

Dividend Resumption Remains Part of the Capital Story

Although there was no H1'FY26 interim dividend, the board indicated its intention to consider returning to dividend payments at the full-year result, subject to trading conditions.

That would represent an important change after distributions were suspended during a more difficult operating period.

The improved net cash position makes such a step more feasible, but the eventual decision will depend on second-half trading and management’s broader capital priorities.

For the longer-term investment case, the dividend itself is less important than what it signals.

A sustainable return to distributions would suggest management believes earnings, cash flow and balance-sheet capacity have stabilised sufficiently to support both business investment and shareholder returns.

Canada Is Emerging as a Key Growth Market

Canada is becoming an increasingly important part of Michael Hill’s growth profile.

H1'FY26 revenue there increased 6.2% to CA$96.3 million.

Same-store sales increased 6.1%, followed by 13.0% growth during the first eight weeks of the second half.

That acceleration is notable because Canada offers a larger market than New Zealand and remains less mature for Michael Hill than Australia.

Continued growth could therefore provide an additional earnings lever if the company can increase productivity and brand penetration without over-expanding the store network.

Michael Hill has also invested in flagship locations, including Yorkdale in Toronto.

Such refurbishments point toward a strategy focused on improving store quality and customer experience rather than simply adding more outlets.

The key test is whether investment in higher-quality stores translates into sustained sales and returns.

Bevilles Broadens the Australian Portfolio

In Australia, the addition of Bevilles gives Michael Hill exposure to another jewellery format and customer segment.

The group operated 37 Bevilles outlets within its 160-store Australian footprint at the half-year mark.

The strategic opportunity is to develop two differentiated brands rather than relying entirely on the core Michael Hill banner.

At the same time, managing multiple brands adds complexity around merchandising, inventory and store positioning.

The value of Bevilles will therefore depend on whether it broadens the group’s addressable market without diluting operational focus.

Michael Hill is also investing selectively in its core network, including flagship refurbishments and a new Bondi Junction store.

This supports a quality-over-quantity approach as the total store network declined to 285 outlets from 294 a year earlier.

Services and Digital Can Increase Customer Value

Future growth does not need to come solely from higher jewellery volumes.

Services such as the Professional Care Plan can generate additional revenue from existing customer relationships.

Digital channels also create opportunities to engage customers beyond physical stores and improve conversion across the broader network.

For jewellery retailers, online and offline channels often work together rather than acting as direct substitutes.

Customers may research products digitally before visiting a store for higher-value purchases.

A more integrated model can therefore support both convenience and personal service.

Michael Hill’s opportunity is to increase customer value across jewellery, services and digital engagement while maintaining the brand positioning required to protect margins.

Consumer Spending and Gold Prices Remain Key Risks

Jewellery remains a discretionary category.

Households can postpone engagement rings, gifts and other jewellery purchases when financial conditions become more difficult.

This means consumer confidence, interest rates and broader household budgets remain important drivers.

Commodity prices create another risk.

Gold represents a major input cost, and sustained higher gold prices can raise inventory and product costs.

Passing those costs through to consumers without affecting demand can be difficult.

Currency movements also matter because Michael Hill operates across Australia, New Zealand and Canada.

The group therefore needs to balance product pricing, sourcing and margin management across several currencies.

The H1'FY26 gross margin of 61.2% provides a useful benchmark for assessing whether these pressures can continue to be managed.

What Matters From Here

The key measure is whether the early H2'FY26 same-store sales growth of 6.0% can be sustained.

Canada deserves particular attention following its 13.0% early second-half increase.

Gross margin will also show whether stronger sales are translating into earnings without increased promotional pressure.

Working capital and inventory remain important after inventory declined to $201.9 million.

The net cash position should indicate whether the balance-sheet improvement is durable.

Management had also flagged a strategy reset around its April 2026 Investor Day. Any future assessment of that strategy will need to focus on how it translates into store productivity, margins, capital allocation and returns.

The eventual full-year dividend decision will provide another indicator of management’s confidence in the recovery.

Conclusion

Michael Hill’s H1'FY26 result showed a retailer generating more profit from relatively modest revenue growth.

Revenue increased 3.0% to $371.0 million, comparable EBIT rose 28.6% to $31.0 million and statutory net profit after tax increased 32% to $22.3 million.

The balance sheet also moved to net cash of $20.7 million from net debt of $9.8 million a year earlier.

Importantly, sales growth was recorded across all three markets, while early H2 trading showed further acceleration.

The recovery is not without risks. Jewellery remains highly discretionary, gold prices can pressure margins and the company still needs to demonstrate that the improved earnings profile can persist through changing consumer conditions.

For Michael Hill, the longer-term test is whether sales growth, cost discipline and tighter capital management can combine to deliver a more durable improvement in returns.