MHJ/Michael Hill Jeweler

Signs of the tough backdrop for consumer stocks continue; MHJ out with a sizeable downgrade. At first glance, the Aussie segment looks good, but flattered by a now underperforming acquisition. They could just post LFL sales to make it all easier. to compare. NZ into the sea.

The gold comments on margin also interesting; MHJ is “short gold” in the same way RWC is “short copper”. But the broad point is the key one; expectations for a more resilient consumer, or at least an improved one, have not come to pass.

I also continue to wonder about Lovisa, another fund manager favourite. Now LOV’s model is the opposite for MHJ, it’s cheap stuff that’s appealing to a much younger crowd. It seems plausible that people are trading down, substituting, whatever it might be.

Equally, it is probably easier (in the sense of Occam’s razor) to just assume disposable income and discretionary items are under pressure, and to avoid either.

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