Michael Hill takes on the Windy City

The move by Michael Hill International [MHI.NZ] to buy 17 stores in the United States for about US$5 million ($7 million) from the Chapter 11 bankruptcy of Whitehall Jewelers Holdings-based in the Chicago area, with 2 stores in St Louis-has me a little worried.

I'm worried because this type of expansion activity veers slightly away from the tried and tested way that the company entered Australia then Canada.

The company set up a handful of stores when they entered their two overseas markets just to test the water.

Australia was started that way and now has 136 very profitable stores and Canada started with a couple and now has 22 virtually break-even stores 3 years later.

Why didn't Michael Hill test the Chicago area with 1 or two stores like they have previously?

It does make sound financial sense, it has worked before.

Micheal Hill, CEO, says the opportunity to buy the distressed sites was a "sound launching pad" to expand the Michael Hill brand across the big US market and secure some "prime sites", very true.

The NZ$7 million purchase price Hill says was largely for the inventory that the stores carried and that was bought at 80c in the dollar.

A good buy there.

Now I'm not an expert in retailing and Jewelry, as Michael Hill clearly is, but what is wrong with "testing the market" as he calls the US move, with a couple of stores, as he has done in the past?

In my opinion you don't test a market with 17 stores, it is too much too soon.

The US Jewelry market is different from Canada, it is more fragmented in demand from state to state and city to city even, and much more competitive. Chicago also has a large black population, with a much less than average yearly income, so the going will be tough, even if Oprah Winfrey does her bling shopping there.

As a shareholder, I would have much preferred little baby steps and less money spent upfront until a few stores were trading for 12 months or so and then make a decision to expand or retreat from there.

There will be more money spent on store refits, staff training etc so the total cost of this exercise will probably exceed NZ$10 million.

This news comes on the back of a great profit announcement this week.

The company reported a record tax paid profit of $25.232m for the twelve months ended 30 June 2008 compared to $21.017m for the previous corresponding period. This was a 20.1% increase in profit on top of a 8% rise in revenue to $376.664 million.

There were 22 additional stores added in the year to bring total store numbers to 210 for the entire group.

A final dividend of 2.0 cents per share with full imputation credits

The dividend will be paid on Monday, 13th October 2008 with the record date being Friday, 3rd October 2008.



Michael Hill shares have moved up strongly this week on the profit result and by almost 4.5% today on the US acquisition news.


Disclosure I own Michael Hill International shares in the Share Investor Portfolio.


Michael Hill International @ Share Investor

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Michael Hill takes on the windy city
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Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2008

Colmar Brunton Poll: 22 August 2008

Aug 22, 2008
By Therese Arseneau

The ONE News Colmar Brunton Poll has finally delivered Labour some good news. A majority of people polled disapprove of National's plans to increase borrowing; and only 37% believe National is being honest and open about its policy plans.

These reservations about National did not hurt the party's support in the poll - it remains relatively steady at over 50%. But these doubts, if left unchecked, are more likely to slowly erode National support and hurt the party in the longer term.

In terms of voting intentions the poll is more mixed for Labour. Its support has increased by 2% in the last month but the gain comes at the expense of the Greens (down 2%), leaving the centre-left no better off. And while there is cause for optimism in Labour's gains in back to back Colmar Brunton polls, their optimism must be guarded. It is simply too soon to know whether this is the start of a new upward trend for Labour.

Polling data is best viewed over a longer term as an indication of the trend of support for the various parties. The first graph is a visual representation of ONE News Colmar Brunton party vote polling data from the 2002 election up to August 2008. Election results in 2002 and 2005 are shown as large diamonds - the light grey lines indicate election dates. The dark blue and red straight lines are the best fit trend lines for National and Labour respectively. The lighter bands represent the 95% confidence limits around these trends.

The long term trend from 2002 remains relatively strong and consistent - and positive for National. But more revealing is the trend for the last year alone as seen in the horizontal dark blue and red lines. For this shorter time period, the better trend is flat with National on 54% and Labour on 36%, both +/- 3.1% with 95% confidence.

Again the news for Labour is mixed: in the last 12 months its downward trend has flattened out but support remains at a level significantly behind National.

The more crucial information in the latest poll concerns the smaller parties. If this snapshot of decided voters was the actual election poll, then none of the smaller parties would cross the 5% threshold. The Greens would be absent, as would New Zealand First, unless Winston Peters wins Tauranga. ACT, United Future and the Progressives would be one-electorate seat parties. The Maori Party would be the only small party with more than one seat.

Even more stark is the long term trend of support for the smaller parties en masse. The second graph is a visual representation of ONE News Colmar Brunton polling data from 2002 to present. It combines the support for all minor parties and is depicted by the orange line.

The trend is strong and clear - the smaller parties combined are losing support. Starting at a high of near 40% at the 2002 election, the combined support for the minor parties was at 12% in the latest poll.

There are further ominous signs for the smaller parties. First, most people polled in the 2005 New Zealand Election Study (NZES) believed there are too many parties in Parliament. Second, there is a public perception that the smaller parties are the tail wagging the dog in Parliament. Third, University of Victoria political scientists Levine and Roberts have found that voters' longer term attachment and loyalty to the smaller parties - known as party identification - is in steady decline: around 22% in 1996 and 1999; 19% in 2002; and down to 16% in 2005.

But New Zealand has a tendency to look like a two party system between elections and more multiparty on election day. This is mainly because the smaller parties do not feature prominently on the public's or media's radar screens between elections. In the first three MMP elections support for the smaller parties grew significantly during the campaign to 38% in 1996, 31% in 1999 and 38% in 2002.

The 2005 election was a notable exception. The smaller parties combined to draw only 20% of the vote. Was 2005 an aberration or the start of a new trend?

In 2002 the Alliance vote collapsed into Labour and in 2005 the centre-right vote consolidated in National. Are New Zealand voters 'going home' to the two major parties? Are we experiencing a profound realignment of our party system? These are the crucial questions of 2008.

ONE News Political commentator Dr. Therese Arseneau is a Senior Fellow in the School of Political Science and Communications at the University of Canterbury. In the lead-up to this year's election, she will be writing a regular column for onenews.co.nz, examining New Zealand's political landscape.


Related Political Animal Reading

Colmar Brunton poll: 17 August 2008
Colmar Brunton Poll: 20 July 2008
Colmar Brunton Poll: 22 June 2008

c Political Animal 2008

EPMU bullies employee out of job because of politics

Looks like a union standard for an employee that you mustn't be discriminated against because of sex,age or politics only apples at the EPMU if you are a Labour Party voter.

The Engineering Printing and Manufacturing Union, a division of the Labour Party, have bullied ACT party list candidate Shawn Tan, who works for them, and suspended him from his employment because of his ACT Party connections.

His employment rights have clearly been breached by EPMU president Andrew Little, a president with designs on being a part of the next Labour Government.

This is a union that has fought employers tooth and nail for doing the same thing that the EPMU are now doing to Tan-trying to bully him into submission because he has different political views to his employer.

This is a union who is also trying to campaign-as an entity separate from any political party-in the 2008 election as a third party under the terms of the Electoral Finance Act.

We all know that this is clearly bollocks of the highest order. The EPMU is closely affiliated with The Labour Party and its dopey members are directly funding Labour's 2008 Election campaign through their "union fees".

Presumably Tan belongs to a union, I hope that union takes the EPMU to the employment court and does them like the socialist basted turkeys that they clearly are.

c Political Animal 2008

PRESS RELEASE: NZ’ers Deliver Strong Message on Anti-Smacking Law

Friday, 22 August 2008, 2:38 pm Press Release: Family First
MEDIA RELEASE 22 August 2008

NZ’ers Deliver Strong Message on Anti-Smacking Law

Family First NZ is welcoming the success of the petition demanding a Referendum on the flawed anti-smacking law.

“To reach the required 285,000 signatures is difficult enough, but the final result shows that an extra 25,000 signatures have been attained. This is evidence of just how strong the opposition to this law is,” says Bob McCoskrie, National Director of Family First NZ.

“The evidence is pouring in that good families are being both persecuted and also prosecuted with eight prosecutions for minor acts of physical discipline in a recent six month period.”

“The rate of CYF notifications has sky-rocketed yet actual cases of child abuse found are remaining the same, and in some areas like the Waikato, actually falling.”

“The anti-smacking law has failed miserably. You know a law is flawed when it fails to address the problem it was supposed to, and implicates good families in the process. Supporters of the law are trying to herald its success because they incorrectly claim nobody has been prosecuted. But we actually want a law that works and catches actual child abuse!”

“The only reason the law was passed in the first place was because the two major parties were whipped to vote for it – which is a little ironic in itself, being an anti-smacking law,”says Mr McCoskrie.

Family First NZ continues to call on the politicians to change the law so that non-abusive smacking is not a crime (as wanted by 85% of NZ’ers according to research), and to tackle the real causes of child abuse.

Related Political Animal Reading

Sascha Cobern's letter a smack in the face for Deborah Morris-Travers
Sascha Cobern's letter to the Editor of the NZ Herald
Anti-smacking petition a slap in the face for out of touch Politicians
Cindy Kiro gets violent
Sue Bradford strikes out: Again

c Political Animal 2008