Sunday, January 20, 2008

Michael Hill Jeweller has a defined growth strategy

[MHI]  Michael Hill International Ltd the Queensland based jeweller, with around 200 stores at present is a growth company and has been doing so since Hill himself opened the first store in Whangerei, New Zealand, in 1979.

Michael Hill Jeweller Ltd share price, like most NZX listed
stocks, has taken a beating so far in 2008 but opportunities
are there to grab the stock when it is down.

It listed in 1987 when it had ten stores and also expanded into Queensland with one store in that year.

The expansion has been expertly crafted under Hill's steady lead and is aspirations to become a "global jeweller" with 1000 stores in the next 20 years, look to be well on track.

A small foothold in Canada has slowly improved since the companies entry there and there have been rumours of a push into the USA and the United Kingdom.

The focus on steady growth is the key to success here.

Michael Hill hasn't expanded in Starbuck style but growth has been targeted, measured researched and focused.

The jewellers brand has been a key to its success, most people who know about the company associate it with certain traits; good friendly service, frequent sales and advertising and catering to the middle of the road customer with a mass manufactured quality product.

Its brand has been changing over the years though and has moved from being a mass discounter to making more expensive rocks cheaper for the average customer.

Whether it be Michael Hill's customers becoming more sophisticated and or the company itself promoting higher priced and larger diamonds to them, the move towards higher margin more expensive product is only going to be good for the bottom line.

Like any company in expansion mode though there are obvious risks involved.

The company face competition from the huge James Pascoe Ltd in Australasia, with a range of branded stores and North American Jewellers will no doubt respond with intense competition when they see the presence of an upstart in their own market.

Recent gold price spikes also wont be good for margins short to medium term.

The company know their markets though.

Extensive research is done into local buying habits and these can vary from state to state and city to city and even unique tastes abound suburb to suburb.

With a long relationship with Westfield in New Zealand and Australia, coveted good positions in Westfield's USA malls maybe easier to get than without that relationship and location of a retailers store can often be a make or break situation.

Michael Hill has got where it has today by careful planning and the ability to use that planning to sell product to consumers that they want. As long as that careful planning continues the company's push to become a truly global jewellery player looks to be an attainable goal.

Disc: I own MHI shares in the Share Investor Portfolio

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