Earnings Review and Free Research Report: Michaels’ Revenue Grew 1.2%; EPS Gained 11.8%

LONDON, UK / ACCESSWIRE / September 15, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on The Michaels Cos., Inc. (NASDAQ: MIK), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=MIK, following the Company’s release of its second quarter fiscal 2017 financial results on August 24, 2017. The arts and crafts store operator exceeded top- and bottom-line expectations and also provided guidance for the upcoming quarter and fiscal year. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member’s account at:

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Earnings Reviewed

For the second quarter ended July 29, 2017, Michaels’ net sales increased 1.2%, or 1.3% on a constant currency basis, to $1.07 billion from $1.06 billion in Q2 2016. The increase was primarily a result of the operation of 10 additional stores during the reported quarter. Michaels’ comparable store sales increased 0.6%, or 0.8% on a constant currency basis, driven by an increase in customer transactions, partially offset by a decline in average ticket. The Company’s sales beat Wall Street’s estimates of $1.06 billion

During Q2 2017, Michaels’ gross profit added 3.0% to $402.5 million from $390.7 million in Q2 2016. As a percentage of net sales, the Company’s gross profit increased 70 basis points to 37.5% compared to 36.8% in the year ago same period. The increase, as a percentage of net sales, was due to higher merchandise margin and distribution-related costs.

Michaels’ selling, general, and administrative expense(SG&A), including store pre-opening costs, increased 3.6% to $314.5 million, or 29.3% of sales, in Q2 2017 from $303.6 million, or 28.6% of sales, in Q2 2016. The increase in SG&A was primarily due to an increase in performance-based compensation, along with expenses associated with the operation of 10 additional stores (net of closures), marketing investments, and higher health care expenses.

For Q2 2017, Michaels’ operating income increased 1.0% to $88.0 million, or 8.2% of sales, compared to $87.1 million, or 8.2% of sales, in Q2 2016. The Company’s interest expense decreased $0.9 million to $31.1 million, from $32.0 million in the year ago period due to interest rate savings from the refinancing of the term loan credit facility in Q3 2016.

Michaels’ net income was $35.56 million, slightly lower compared to Q2 2016 net income of $35.62 million. Excluding net non-recurring, inventory-related purchase accounting adjustments and integration expenses associated with the acquisition of Lamrite West, adjusted net income was $35.9 million for Q2 2016.

Michaels’ diluted earnings per share increased 11.8% to $0.19 from $0.17 in Q2 2016. Excluding net non-recurring, inventory-related purchase accounting adjustments and integration expenses associated with the acquisition of Lamrite West, the Company’s adjusted diluted earnings per share was $0.17 in Q2 2016. Michaels’ earnings beat analysts’ estimates of $0.16 per share.

Store Update

During Q2 2017, Michaels opened five new Michaels’ stores and closed three Aaron Brothers’ stores compared to five new Michaels’ store openings and three Aaron Brothers’ stores closing in Q2 2016. At the end of the reported quarter, the Company operated 1,230 Michaels’ stores, 101 Aaron Brothers’ stores, and 35 Pat Catan’s stores.

Cash Matters

Michaels ended Q2 with $134.1 million in cash, $2.8 billion in total debt and $681.4 million in availability under its asset-based revolving credit facility. The Company’s average Michaels inventory on a per store basis, inclusive of distribution centers, in transit and inventory for its ecommerce site, increased 2.1% to $864,000 compared to $846,000 at the end of the year ago same period.

Michaels’ inventory at the end of Q2 2017 was $1.20 billion, reflecting an increase of 4.4% compared to $1.15 billion in Q2 2016. The increase in inventory was primarily due to additional inventory associated with the operation of 10 additional stores and earlier receipt of inventory to support key merchandising initiatives in H2 2017.

During Q2 2017, Michaels purchased 5.4 million shares, or $101.4 million, under its share repurchase authorization. The total remaining authorization for future repurchases was approximately $398.6 million.

Outlook

For fiscal 2017, Michaels is forecasting total net sales growth of 2.8% to 3.8%, including the impact of the 53rd week, which is planned to be approximately $80 million and comparable store sales to increase 0.5% to 1.5%. The Company is projecting to open 18 new stores, including 17 new Michaels’ stores and one new Pat Catan’s store, relocate 13 Michaels’ stores, and close 14 Aaron Brothers’ stores.

For FY17, Michaels is estimating operating income to be in the range of $735 million to $750 million; interest expense to be approximately $131 million and diluted earnings per common share to be between $2.11 and $2.16; while capital expenditures are expected to be between $125 million and $135 million.

For the third quarter of fiscal 2017, Michaels is expecting comparable store sales to increase 1.2% to 2.2%, and the Company is projecting to open nine new Michaels’ stores, one new Pat Catan’s store, relocate five Michaels’ stores, and close four Aaron Brothers’ stores. For the upcoming quarter, the Company is anticipating operating income in the range of $150 million and $155 million; interest expense to be approximately $34 million, and diluted earnings per common share to be between $0.41 and $0.43.

Stock Performance

On Thursday, September 14, 2017, the stock closed the trading session at $21.55, falling 1.06% from its previous closing price of $21.78. A total volume of 1.95 million shares have exchanged hands. Michaels Cos.’ stock price surged 8.78% in the last one month and 14.69% in the past three months. Furthermore, since the start of the year, shares of the Company have gained 5.38%. The stock is trading at a PE ratio of 11.38 and currently has a market cap of $3.69 billion.

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