Michael Hill International expects the closure of its US stores and repositioning of its struggling charm brand Emma & Roe to slash $20 million from its half year earnings.

The company said it expects to report pre-tax earnings of around $15 million for the six months to December 31, down from $40 million in the same period a year earlier.

The half year result will include an $8.4 million provision for onerous leases and $11.4 million from impairments on property, plant and equipment, all related to its exit from the US and closure of some Emma & Roe stores.

Michael Hill said its negotiations with landlords of its Emma & Roe stores are ongoing, and it is still finalising its approach to exiting the US, but it was appropriate to provide an update on its accounting treatment of the moves.

The company called time on its US ventures in January after ten years of losses, and at the same time said it will reduce the number of Emma & Roe stores.

The US business and Emma & Roe made up five per cent of group revenue in the last financial year, but together contributed a $12 million loss.

Chief executive Phil Taylor said the brand reposition and the US exit are central to the company’s long-term core business, despite the financial impact.

“The decisive actions taken to reduce the Emma Roe store footprint and exit the US are critical to strengthening the foundations of Michael Hill International as we focus on building significant long-term value in our core business across Australia, New Zealand and Canada,” Mr Taylor said in a statement.

Michael Hills ASX-listed shares dropped 7.5 cents, or 6.2 per cent, to a three month low of $1.13.