Emma & Roe to be wound up

Emma&RoeSMALLMichael Hill has decided to abandon plans to reposition its struggling Emma & Roe brand and will instead wind up the business.

The move will see the listed jeweller refocus resources on its core Michael Hill business after a strategic review identified a need to reprioritise.

Six stores and an e-commerce platform will be shut down in the closure, following on from the 24 stores already closed since March.

Only a few months ago Michael Hill had planned to reposition Emma & Roe in the so-called ‘demi-fine’ part of the jewellery market.

But on Friday the jeweller indicated that it wasn’t the right time to be splitting its priorities.

“We have decided that a singular focus on the Michael Hill brand will best position us to deliver a stronger customer proposition and financial results,” chief executive Phil Taylor said.

Michael Hill will pursue negotiations with landlords to close its six remaining Emma & Roe stores, while identifying redeployment or redundancy plans for staff.

Lease termination and severance costs are currently estimated to be no higher than $3.1 million, following the $5.8 – $7.9 million in costs associated with the closure of Emma & Roe stores earlier this year.

Emma & Roe was initially launched as a test brand in 2014 after a review of the jewellery market conducted under former chief Mike Parsell identified an opportunity for a more fashion-focused offer that could compete with the likes of Lovisa.

It was believed that Emma & Roe could focus on emerging preferences for personalised jewellery while Michael Hill maintained its focus on fine diamonds and bridal customers.

But despite several years of heavy investment in opening stores in both Australia and New Zealand, the business was never able to find its feet and deliver sustainable same-store sales growth.

It missed revenue targets in fiscal 17, leading the brand to a worse than expected $6.9 million loss.

Emma & Roe delivered a 5.8 per cent decline in same-store sales for the nine months to 31 March. Total sales were up 16 per cent to $11.7 million.

There is also a need for the business to invest in its core Michael Hill operations, particularly in Australia, where it has around 170 stores.

Michael Hill represents 95 per cent of group revenue, but Australian operations have been struggling for some time, with same-store sales declining 0.3 per cent for the nine months to 31 March.

Stores in Canada and New Zealand have performed better, but US operations were culled earlier this year after the brand failed to gain traction.

Queensland University of Technology Associate professor Gary Mortimer said the decision to close down Emma & Roe made sense.

“When one element of your brand is under-performing, it can tie up a great deal of your resources and attention,” he said.
“When this brand is really quite a small proportion of the overall business,  it is better to either close, or re-brand to the core business.”

The decision to close Emma & Roe comes just a day after the business undertook a management reshuffle that saw the charm retailer’s current general manager, Tishara Mina, take on responsibilities within the Michael Hill business.

“The new structure recognises the scale and importance of Michael Hill in Australia and ensures that management has greater oversight and control over our key strategic priorities,” Taylor said of the management changes on Friday.

UPDATED – 10:10 AEST

More to come.

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