The Michael Hill International Ltd (ASX: MHJ) share price has had a disappointing start and is deep in the red in morning trade on Wednesday.
At the time of writing the jewellery retailer's shares are down 7.5% to 62 cents.
Why is the Michael Hill share price sinking lower?
Investors have been hitting the sell button in a hurry this morning after Michael Hill released a trading update for the third quarter of FY 2019.
Although the company's performance has continued to improve, investors appear to be disappointed that same store sales continue to be negative.
During the third quarter the company posted a 1.5% decline in same store sales and a 0.8% drop in total sales.
Whilst any decline is disappointing, it does compare favourably to the first quarter where same store sales were down 11% and the second quarter where they were 2.9% lower.
Furthermore, management advised that the adoption of a new retail operating model in March has had an encouraging start.
The new integrated customer-led retail operating model, which has a focus on greater alignment of merchandise, marketing and retail operations, appears to have been the catalyst for an increase in same store sales during the month of March.
CEO Daniel Bracken said: "We are particularly encouraged by the early results achieved from our new integrated customer-led retail operating model, which was introduced in March and saw same store sales grow for the month. This new model was one of the critical strategic refinements announced with our half-year results."
He added: "This new approach commenced in March to coincide with the launch of Michael Hill's proprietary Southern Star diamond collection. We have already seen the potential for the new integrated model to lift customer engagement and sales, as well as improve operational efficiencies."
For the nine months to March 31, same store sales were down 4.8% and total sales were 3.2% lower at $427.2 million.
Should you invest?
Whilst I think the new retail operating model looks promising, I'd suggest investors hold off an investment for the time being and wait to see how things progress over the next couple of quarters.
In the meantime, I would sooner buy fellow retail shares Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL). I think they are cheap at current levels and, importantly, are delivering solid top line growth.
