Michael Hill International Limited (ASX: MHJ; NZX: MHJ) expects FY26 comparable earnings before interest and tax to reach between A$22 million and A$24 million, representing growth of 44% to 57% from A$15.3 million in FY25. Group sales for the 52 weeks ended June 28, 2026 increased 2% to A$654.7 million, or 3.9% on a constant-currency basis. Group same-store sales rose 3% in Australian dollar terms and 5.2% at constant currency, with positive growth recorded across Australia, Canada and New Zealand. Michael Hill shares rose 4.48% to A$0.35 in early Australian trading on July 31 following the update. The central investor question is whether the retailer can extend this earnings recovery beyond cost discipline and seasonal trading into a sustainable improvement in margins, cash returns and store productivity.
Why does Michael Hill’s 44% to 57% EBIT increase matter more than its modest 2% sales growth?
The most significant feature of Michael Hill International’s FY26 trading update is not the headline sales number. It is the amount of additional earnings the company expects to generate from relatively modest revenue growth.
Using total sales as the denominator, the anticipated comparable EBIT range implies a margin of approximately 3.4% to 3.7%, compared with roughly 2.4% in FY25. That represents a year-on-year improvement of approximately 98 to 128 basis points, subject to the final results and any accounting adjustments.
The improvement suggests that higher sales volumes, stable gross margins and tighter control of operating costs have produced meaningful operating leverage. Michael Hill said the expected earnings increase had been supported by strong sales, stable margins and disciplined cost management despite an inflationary operating environment.
However, the comparable EBIT measure remains unaudited and excludes the effects of AASB 16 leases, certain software accounting adjustments and normalisation items. Investors will therefore need the August statutory results to understand how much of the comparable improvement converts into reported profit and cash generation.
The result also needs to be measured against Michael Hill International’s longer-term ambition. At its April 2026 Investor Day, the company said that a strong outcome for the group would resemble an EBIT margin of 10%, supported by better store productivity, diversified revenue, gross profit improvement and operating leverage.
FY26 therefore appears to be a credible step in the right direction rather than the completion of the turnaround. Even at the top of the expected range, Michael Hill International’s comparable EBIT margin remains materially below that longer-term ambition.
How did Canada, Australia and New Zealand support Michael Hill’s FY26 same-store sales growth?
Canada remained Michael Hill International’s strongest growth market during FY26. Canadian same-store sales increased 7% in local currency for the full year, while total Canadian sales rose 7.3% to C$173.6 million.
The performance extended the momentum reported during the first half, when Canadian revenue increased 6.2% and same-store sales rose 6.1%. Canada also recorded 7.6% same-store sales growth and 8.7% total sales growth during the second half.
This matters because Michael Hill International has identified Canada as its principal geographic growth engine. The company currently operates 81 stores in the country and has previously outlined an ambition to build towards approximately 85 to 90 locations through disciplined openings in high-traffic malls, alongside digital expansion and stronger product allocation.
Australia, including Bevilles, generated full-year same-store sales growth of 4.8%. Total Australian sales increased 2.4% to A$371.9 million, indicating that existing-store productivity grew faster than the overall network.
New Zealand delivered the clearest sequential improvement. Same-store sales rose 3.6% for FY26, but the second-half rate accelerated to 5.6%. Total New Zealand sales increased 3.1% to NZ$112.4 million for the year and 4% during the second half.
The geographic breadth of the improvement reduces Michael Hill International’s dependence on a single market. Canada is still carrying much of the growth narrative, but positive same-store sales in Australia and a stronger New Zealand second half indicate that the recovery is becoming more balanced.
Foreign exchange nevertheless diluted the reported result. Group sales increased 3.9% at constant currency but only 2% after translation into Australian dollars. Same-store sales grew 5.2% at constant currency but 3% on a reported Australian dollar basis, showing that operational momentum was stronger than the headline group numbers initially suggest.
What does Michael Hill’s smaller store network reveal about its productivity-first strategy?
Michael Hill International ended FY26 with 281 stores, down from 287 a year earlier. The company closed eight stores during the period and opened two, resulting in a net reduction of six locations.
Australia finished the year with 157 stores, including Bevilles, after four closures and one opening. Canada ended with 81 stores after one opening and two closures, while New Zealand’s network declined to 43 locations following two closures.
The combination of a smaller network and higher group sales is consistent with management’s shift towards productivity rather than expansion for expansion’s sake. It suggests Michael Hill International is becoming more selective about leases, store economics and where capital is deployed.
The Australian strategy is particularly focused on maximising sales density within the existing network. Michael Hill International has indicated that it intends to exit locations that fail to meet return hurdles while developing digital sales, bridal categories, fashion jewellery and personalised services through the stores that remain.
Canada is different. Management sees room for selective network expansion because the brand still has lower penetration in parts of the market. The challenge will be to preserve Canada’s existing sales productivity while adding stores, rather than chasing footprint growth that dilutes returns.
The store rationalisation also sits within a wider simplification of Michael Hill International’s brand portfolio. The company is concentrating resources on the Michael Hill and Bevilles businesses, reducing complexity created by smaller brands and redirecting selected capabilities into the two core platforms.
Medley was scheduled to be wound down by the end of FY26, while Watches Galore was being redirected into the Bevilles ecosystem. The bespoke bridal experience developed through TenSevenSeven was being tested across parts of the Michael Hill network rather than maintained as a separate growth platform.
The FY26 update indicates that the operating model is moving closer to the simplified structure outlined in April. The next step is to demonstrate that fewer brands and fewer marginal stores produce sustainably higher returns, not merely temporary cost savings.
Why does Michael Hill’s second-half earnings profile show that seasonality remains a major hurdle?
Michael Hill International’s first-half result provides an important counterweight to the strong full-year EBIT growth headline. The company generated comparable EBIT of A$31 million during the first half of FY26, up 28.6% from A$24.1 million a year earlier.
A full-year comparable EBIT result of A$22 million to A$24 million would therefore imply a second-half comparable EBIT loss of approximately A$7 million to A$9 million, assuming the half-year and full-year measures are calculated on the same basis.
For comparison, the FY25 numbers imply a second-half comparable EBIT loss of approximately A$8.8 million. This means the FY26 second-half earnings outcome could range from broadly stable to modestly improved, even though the full-year growth rate appears much stronger.
The pattern reflects the seasonality of jewellery retailing. Michael Hill International earns a disproportionate share of annual profit during the Christmas period, which falls within the company’s first half. The quieter second half must absorb a substantial portion of the group’s fixed store, employee, technology and support costs.
The latest sales numbers show that the second half was not operationally weak. Same-store sales grew across all three markets, including 7.6% growth in Canada and 5.6% in New Zealand. Group second-half total sales nevertheless increased only 0.7% in reported Australian dollar terms to A$284.4 million, partly reflecting currency translation.
The implication is that Michael Hill International’s next phase of margin improvement cannot rely solely on a stronger Christmas season. Progress towards the group’s longer-term margin ambition will require a more productive second half, better inventory turns, higher digital contribution, improved Bevilles economics and more efficient use of fixed operating costs throughout the year.
Can Michael Hill protect jewellery margins while gold and silver costs remain elevated?
Michael Hill International’s ability to hold gross margins broadly stable despite elevated precious-metal prices has been one of the more encouraging features of FY26. During the first half, the gross margin was 61.2%, only 10 basis points below the prior-year period.
Management attributed the resilience to product mix, pricing discipline, promotional execution and efforts to offset higher gold and silver input costs. The company also negotiated revised terms with a major supplier and reduced inventory by A$11.3 million to A$201.9 million during the first half.
Those actions matter because rising commodity costs create a difficult pricing equation for jewellery retailers. Passing every increase to customers can weaken affordability and sales volumes, while absorbing the costs directly compresses margins.
Michael Hill International’s accessible-luxury positioning requires the company to protect perceived value while maintaining product economics. Its strategy includes clearer opening, core and premium price tiers, stronger vendor partnerships, product innovation and more disciplined promotional activity.
New collections, personalised jewellery, bridal offerings and services may support higher transaction values or better margins, but the full-year results must provide evidence that the improvement is broad and repeatable. Stable margins in a preliminary trading update are encouraging, although investors still need the final gross-margin figure, inventory position and statutory cost reconciliation.
The A$22 million to A$24 million comparable EBIT range suggests management navigated FY26 commodity pressure more effectively than in FY25. Sustaining that outcome in FY27 will depend on sourcing, pricing, product design and customer demand moving in the same direction.
Will Michael Hill’s FY26 results restore its dividend and improve investor sentiment?
Michael Hill International did not declare an interim dividend for FY26. At the half-year result, the board said it intended to return to dividends at the full-year result, subject to trading conditions continuing and the company’s dividend policy.
The April capital-allocation framework repeated that intention and indicated a dividend policy of distributing 50% to 75% of adjusted net profit after tax, subject to balance-sheet strength and other capital requirements.
The July trading update did not provide a fresh dividend commitment. That omission does not indicate that the previous intention has been withdrawn, but it leaves the final decision as a significant catalyst for the August results.
At the half year, Michael Hill International had moved to net cash of A$20.7 million from net debt of A$9.8 million a year earlier. Inventory had declined, the debt facility had been refinanced on improved terms and capital expenditure was being managed more selectively.
The full-year balance sheet will determine whether those improvements survived the second-half working-capital cycle. A restored dividend would provide shareholders with evidence that the earnings recovery is converting into distributable cash. A further delay could indicate that the board is prioritising liquidity, investment or greater certainty over the durability of the recovery.
Michael Hill shares rose 4.48% to A$0.35 in early trading on July 31, valuing the company at approximately A$134.7 million. The price was about 7.7% above its June 30 close and approximately 1.4% above its December 31, 2025 close.
However, A$0.35 remained approximately 26% below the 52-week high of A$0.475 and only around 17% above the 52-week low of A$0.30. The market reaction indicates that investors welcomed the FY26 update, but the wider share-price range suggests confidence in a sustained turnaround is not yet complete.
What must Michael Hill’s August results prove about its FY27 growth strategy?
Michael Hill International plans to release its FY26 full-year financial results on Friday, August 28, 2026, followed by an investor briefing on Monday, August 31.
The results need to confirm the comparable EBIT range and provide a transparent reconciliation to statutory profit. Investors will also need clarity on the full-year gross margin, inventory, net cash or debt, capital expenditure, normalisation items and dividend decision.
Operationally, attention will centre on whether Bevilles is generating consistent store-level profitability following its reset. Management has said that any further Bevilles expansion will be governed by a stage-gate framework requiring sustained same-store sales growth, improved gross profit and acceptable returns on invested capital.
Canada must continue to deliver growth without sacrificing store economics. Australia needs to generate stronger productivity from a disciplined footprint, while New Zealand must convert its second-half acceleration into a durable recovery.
The FY26 trading update shows that Michael Hill International has improved sales momentum, protected margins and extracted more earnings from the existing business. What remains unresolved is whether those gains can carry through the quieter half of the year and move the company meaningfully towards its longer-term profitability ambition.
The strongest confirmation would be a statutory result supported by cash conversion, controlled inventory, a credible dividend and evidence that Bevilles, digital commerce and Canadian expansion can contribute to earnings without reintroducing the complexity that management has spent FY26 removing.
What are the key takeaways from Michael Hill International’s FY26 trading update?
- Michael Hill International expects FY26 comparable EBIT of A$22 million to A$24 million, up 44% to 57%.
- Group sales increased 2% to A$654.7 million and rose 3.9% at constant currency.
- Same-store sales grew across Australia, Canada and New Zealand, with Canada remaining the strongest market.
- Stable margins and disciplined operating costs created significantly stronger earnings leverage than the sales increase alone suggests.
- The store network declined from 287 to 281 locations as management prioritised productivity and return hurdles.
- The group is simplifying its portfolio around Michael Hill and Bevilles while absorbing or closing smaller brands.
- The full-year EBIT range implies that second-half profitability remains constrained by jewellery retail seasonality.
- Elevated gold and silver costs remain important margin risks for FY27.
- The August 28 results will determine whether stronger earnings are supported by statutory profit, cash conversion and a restored dividend.
- Progress towards Michael Hill International’s longer-term 10% EBIT margin ambition will require substantially stronger productivity beyond FY26.
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