Michael Hill’s sales fell 9% in the first fiscal quarter as the retailer underestimated how much marketing it needed for its strategic shift away from discounting, the company said. 

Group revenue fell to AUD 112.1 million ($79.7 million), the jeweler reported Friday. While the Australia-based retailer believes the new approach will strengthen brand loyalty and raise the value of its products, the move lacked the adequate marketing to support it, it added. Same-store sales — those at branches open for at least a year — slid 11% in the three months ending September 30. 

“During the quarter and in line with our strategy, the group increased gross profit margin as it reduced its reliance on discount-based events,” said Michael Hill CEO Phil Taylor. “However, on review, this shift was not adequately supported by sufficient levels of marketing and promotional activities to drive top-line sales.” 

Despite the challenging transition, the company will continue with its plan to reposition Michael Hill as an omni-channel brand that stands out from others, Taylor added. 

Same-store sales in Australia, the jeweler’s largest market, fell 13% to AUD 62.5 million ($44.5 million). During the period, one store opened, and three closed, for a total of 169 locations at the end of the quarter. 

Sales in New Zealand slipped 8% to NZD 23.4 million ($15.2 million), with a single store launch bringing the total in the country to 53. Sales in Canadian shops plunged 11% to CAD 21.8 million ($16.7 million), with a total of 84 stores trading at the end of September. 

The group shut four Emma & Roe locations during the period, in line with its closure plan for the brand. Two shops continue to operate, as does the Emma & Roe website. Heavy discounting at the remaining outlets drove quarterly sales up to AUD 2.4 million ($1.7 million) from AUD 1.1 million ($794,210) last year. 

Last month, Michael Hill announced that Phil Taylor would be stepping down as CEO. Daniel Bracken will take on the role on November 15. 

Image: Michael Hill store, Newmarket, Ontario, Canada. (LGA)

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