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Michael Hill ends failed US experiment

Michael Hill International, the jewellery chain founded by its namesake, will wind up its US operations after a decade-long investment failed to build a profitable business, and is overhauling its Emma & Roe jewellery line.

The Brisbane-based company said it expects the changes to improve profitability with a stronger investment focus on those areas where it's getting the best return. The retailer will close its nine US stores, which haven't generated enough traction to warrant greater investment, and shift the Emma & Roe product range into demi-fine jewellery with more sales online and a smaller store footprint. Michael Hill will write down the Emma & Roe assets by about A$7 million but hasn't figured out the financial impact of the US exit yet.

"These actions strengthen the foundations of Michael Hill International as we aim to improve the operating performance of our group assets by refocusing capital and resources to those parts of the business delivering the highest returns and potential for growth," chief executive Phil Taylor said in a statement. "We see these actions, along with an increased investment on improving the group’s digital capabilities and e-commerce platform, as being the key pillars to driving ongoing sustainable business growth and attracting customers in new and engaging ways."

Michael Hill launched the Emma & Roe brand in 2014, which targeted higher turnover with lower value items such as charms, bracelets, rings, pendants and interchangeable earrings. The sub-brand has expanded to 30 stores since then, accounting for five percent of group sales, but contributing a loss.

"While disappointed with the past results of Emma & Roe, it's important that the company maintains its vibrant culture of innovation in order to expand its reach and engage with new and emerging customer segments," Taylor said.

The retailer launched in the US in 2008 and started to scale up just before the global financial crisis, buying 17 stores in Illinois and Missouri from Whitehall Jewelers after the US firm filed for Chapter 11 bankruptcy. Michael Hill responded by closing half of those stores in 2010 and only renewed its aspirations in the world's biggest economy four years later, targeting the nation's top 100 malls.

"Our time in the highly competitive US jewellery market taught us a lot and helped to strengthen our core business including the development of our bridal collection strategy and the development of our professional care plan," Taylor said. "However, our US operations have not gained sufficient traction in recent years and the level of capital required to scale up the business is not warranted under current trading conditions."

The retailer said its New Zealand, Australian and Canadian businesses continue to perform strongly, and it will target "strategically suitable growth opportunities to strengthen these assets".

The dual-listed shares rose three percent to $1.39 on the NZX, having declined 6.7 percent over the past 12 months.

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