Michael Hill Tries to Scale the U.S. Mountain

When I met Michael Hill International U.S. retail manager Darcy Harkins yesterday, he began by telling me about its founder’s colorful backstory, which he says forms the brand’s DNA. New Zealander Hill dreamed of becoming a concert violinist but ended up unhappily stuck at his uncle’s jewelry store. At age 40 a fire destroyed his house and possessions. “I thought, There must be more to life than this,” he said later. So he struck out on his own.  

He soon headed a successful chain of jewelry stores in New Zealand. His secret: A less formal atmosphere than the traditional jeweler, built around an open U-shape layout. The brand soon expanded to Australia, where it is now headquartered. In both countries, it is considered a market leader akin to Kay.

But they are also small markets, and having gone public, the company wanted to grow. In 2002, it planted its flag in Canada, where it now runs 54 stores. And then it looked to the United States.

In August 2008, Michael Hill International bought 17 U.S. stores—15 in the Chicago area, two near St. Louis. In many ways, its timing was great—it was able to snag the stores from liquidating Whitehall for 80 cents on the dollar. Its timing was also terrible. The next month, Lehman Brothers collapsed, taking much of the U.S. economy down with it. 

Early on, CEO Mike Parsell declared that, if its American model works, it might build a chain of 800 stores. But after a few years of losses, the original 17 stores were whittled down to 10 in 2010 and now six. The economy was the main culprit, but executives realized that they hadn’t fully grasped the American way of jewelry buying.

According to Harkins, a transplant from down under, Michael Hill stores have traditionally been located in supermarket-type environments that are gathering points for the local community. They mostly sell fashion items. In the U.S., the business is built on bridal. It retuned its merchandise assortment, with help from veteran jewelry executive Sam Merksamer. 

Now, it can point to its American operations as an emerging success story. Comps for its U.S. division jumped 7.2 percent in the first nine months of fiscal 2015, building off a 6.1 percent comp gain in fiscal 2014. For the first six months of fiscal 2015, U.S. division revenue rose 18.1 percent to $5.94 million, although the division posted a half-million dollar loss. 

It’s also starting to expand. In March 2014, it opened a store in Columbus, Ohio; two months later, it opened a store in the Mall of America in Minneapolis. Now it plans a second “cluster” in the Northeast. This month, it opened two stores in the New York City area: one in Queens Center in Elmhurst, N.Y., and one in the Roosevelt Field Mall in Garden City, N.Y. Another one is slated for American Dream, the upcoming mega mall in East Rutherford, N.J. 

A few things make Michael Hill a retailer to watch: 

– As a public company, it has the resources to finance its expansion.

– It has been successful in its first three markets, and its U.S. comps now exceed the industry average.

– The company has long been known for attention-getting, sometimes offbeat, marketing. For years, Hill starred in its ads, introducing himself with “Hello, Michael Hill Jeweler.” Its marketing now targets millennials, and is built around the slogan We’re for Love. In February, it ran an ad during the Super Bowl that garnered notice by featuring a same-sex couple. 

– The store has a more modern layout accented with purple, which was a plus for at least one blogger: 

I had been shopping for rings with my now girlfriend and we had visited several stores like Zales, Kay, and Jared and found the stores boring and dull with white walls and jewelers in suits from the 90’s. We had never heard of Michael Hill before and the store caught our eye as we walked by. It had modern purple lighting with a gray backdrop and multiple flat screen TV’s with ads and information about their product.… The staff were more modernly dressed and not as proper as the other stores.… If it had not been for the layout of the store that caught my eye I may not have found the perfect ring.

Courtesy Michael Hill

Michael Hill in the Mall of America

The stores carry only proprietary product, including its own charm brand, Emma & Roe. (The name is a mixture of the founder’s daughter’s name and wife’s maiden name.) It is testing seven Emma & Roe concept stores in Australia and one in New Zealand.

Harkins considers founder Hill, who now chairs the company and was knighted in 2008, one of its prime assets. His family still owns a majority of the company, and  Sir Michael, now in his 70s, will visit the Queens, N.Y., opening next week.

And it still has its eyes on a large U.S. presence: Harkins says an 800-store chain remains possible. (It currently numbers 289 worldwide. Officially it wants 1,000 stores worldwide by 2022.) 

For now, though, the company is mostly looking for U.S. locations in top malls. Harkins admits America is a saturated, diverse, and, of course, expensive market. It has had a bumpy time establishing itself here. But it may be righting the ship and does not seem to be giving up.

JCK News Director