Listed jewelry chain Michael Hill (ASX:MHJ) has set itself up for a pounding when the ASX reopens on Monday after issuing a weak trading update on Friday. The update, released via the ASX at 5:19 pm, well after Friday's close, has resulted in a stack of pain awaiting the stock when the ASX reopens at 10 am today.

The bottom line for Michael Hill is that weak consumer demand, especially in New Zealand and parts of Australia, and record gold prices are making life increasingly tougher for the jewelry chain, and the expected improvement in 2024 hasn't materialized.

"Positive sales momentum had been expected through the second half in line with anticipated improvements in consumer sentiment and economic conditions. Unfortunately, this has not materialized, with second-half sales performance broadly in line with the first half, and margins still under pressure," the company said on Friday.

The company further stated, "In line with the first half, gross margin remains suppressed due to sustained higher input costs and record gold pricing."

This is one of the most obvious downsides of the record run in gold prices this year. "All markets continue to experience aggressive, promotionally-led retail trading conditions, which is also contributing to margin pressure."

This has seen a dramatic impact on earnings. "Given the compressed sales and continued gross margin decline, previously reported first-half earnings have been eroded by an EBIT loss of ~$10m for FY24Q3," Michael Hill said in Friday's statement.

With the company reporting an EBIT of $31.3 million in the December half-year, that loss of $10 million in the March quarter will leave a big hole in the full year's bottom line.

"Positive sales momentum had been expected through the second half in line with anticipated improvements in consumer sentiment and economic conditions. Unfortunately, this has not materialized, with second-half sales performance broadly in line with the first half, and margins still under pressure," the company said on Friday.

Australia is the company's major market, and their sales growth has been positive year-to-date, but that is a bit misleading as Michael Hill says that growth is being "driven by the inclusion of the Bevilles brand in FY24 only."

"Sales performance in the core Michael Hill brand has improved marginally compared to the first half but remains negative compared to last year. The Bevilles brand has also not met sales expectations."

And across the Tasman, the Kiwi remains tough, or as the company put it, "our most challenged with deeper macroeconomic pressures significantly impacting consumer behavior and discretionary spend."

"As a result, as the business navigates the prolonged impact of cost-of-living pressures on consumer sentiment, management is activating initiatives to stimulate sales and restore margin. There is also a heightened focus on managing operational costs and capital expenditure. Actions have been taken to reduce costs across the business, including inventory, corporate overheads, underperforming stores, and further optimization of store rostering."