Michaels Cos. (MIK) Tops Q4 EPS by 1c, Revenues In-Line; Offers Q1 Revenue Outlook

Michaels Cos. (NASDAQ: MIK) reported Q4 EPS of $1.26, $0.01 better than the analyst estimate of $1.25. Revenue for the quarter came in at $1.72 billion versus the consensus estimate of $1.72 billion.

Fourth Quarter Fiscal 2019:

• The decline in sales for the fourth quarter of fiscal 2019 compared to the prior year period is due to lower comparable store sales, the closure of our Pat Catan’s stores during the fourth quarter of fiscal 2018, and a decrease in wholesale revenue. This was partially offset by sales related to 16 additional Michaels stores (net of closures) since the end of the fourth quarter of fiscal 2018.
• At the end of the fourth quarter of fiscal 2019, the Company operated 1,274 Michaels stores.
• Operating income was $275.0 million compared to $273.2 million in the fourth quarter of fiscal 2018. Adjusted operating income for the fourth quarter of fiscal 2019 was $278.6 million compared to $333.2 million in the fourth quarter of fiscal 2018. A full reconciliation of Adjusted operating income is available within the tables of this press release.

“Our fourth quarter results were consistent with our expectations, reflecting underlying business trends and the anticipated headwinds of a shorter holiday selling season. This was partially offset by improvements to our execution on seasonal transitions and events during the fourth quarter. We also made strong progress on the implementation of our ‘Maker’ strategy, which provides a clear roadmap for future growth,” said Mark Cosby, Chief Executive Officer. “Looking ahead, I am confident in Ashley’s leadership as he and the entire team work to position Michaels to deliver sustainable growth and profitability over time.”

Cosby continued, “We are closely monitoring the rapidly changing developments from the Coronavirus outbreak, and Ashley is leading the efforts of our crisis team. The safety of our customers and our employees is our top priority during this challenging time. We are also assessing the potential impact on our business and, at this time, do not anticipate material supply chain disruptions during our first quarter. On the demand side, we have seen some evidence of slowing sales in certain categories and slightly increased conversion in our ecommerce business over the past few days. These are early observations and we will have more information as events unfold. In the meantime, we believe we have ample liquidity and considerable financial flexibility to navigate this uncertainty and position Michaels for future success.”

Ashley Buchanan, Chief Executive Officer Designate, said, “Since joining Michaels in early January, I have focused on the areas where we can improve our execution, as well as the key initiatives that will drive us forward. There is more work to do, and I am committed to taking the necessary actions to improve both our operations as well as our customer experience. The path ahead will likely not be linear, but I am confident that the successful execution of our ‘Maker’ strategy will best position Michaels for sales growth, enhanced profitability and free cash flow generation in the future.”

GUIDANCE:

Michaels Cos. sees Q1 2020 revenue of $1.08-1.1 billion, versus the consensus of $1.09 billion.

In light of the rapidly changing developments arising from the Coronavirus outbreak, the Company is not providing a formal full year outlook for Fiscal Year 2020 at this time. We are, however, providing a baseline outlook for the first quarter that excludes any potential impact from the Coronavirus outbreak.

For the first quarter of fiscal 2020, and prior to any impact from the Coronavirus situation, the Company expected:

• Net sales to be between $1.08 billion and $1.10 billion
• Comparable store sales to be in the range of -1.5% to 0.0%
• Adjusted operating income to be between $74 million and $82 million
• Before considering potential impacts to our business from the Coronavirus outbreak, we expect our overall performance to improve in the second half of the year as compared to the first half. In addition, we expect adjusted operating income in the second quarter of fiscal 2020 to be materially lower when compared to the prior year period due to higher margins in the second quarter last year ahead of the impact of tariffs.

For earnings history and earnings-related data on Michaels Cos. (MIK) click here.

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