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Bear of the Day: The Michaels Companies (MIK)

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The Michaels Companies, Inc. (MIK - Free Report) is a leading arts and crafts specialty retailer in North America. Customers can find a wide range of project materials, and its departments include floral, framing, home décor and seasonal merchandise. Along with its many private brands, Michaels has partnerships with Crayola, Elmer’s, and Cricut.

Q3 Earnings Disappoint Wall Street

Michaels’ third quarter came in weaker-than-expected on nearly all fronts, and shares closed down over 15% after results were released.

Adjusted earnings and revenue lagged behind the Zacks Consensus Estimate, and comparable-store sales fell 2.2% year-over-year. Total sales declined 4% and EPS was down 17% compared to the prior-year period.

Management pointed to challenging macroeconomic and industry trends as a reason for its underperformance, and has promised to place more emphasis on marketing, seasonal sales events, and inventory management strategies.

Analysts have turned bearish on Michaels, with twelve cutting estimates in the last 60 days for fiscal 2020

Earnings are expected to see double-digit negative growth for the year, and the Zacks Consensus Estimate has dropped 27 cents for that same time period from $2.38 to $2.11 per share.This sentiment has stretched into 2021, though sales and earnings growth could return to positive territory.

MIK is now a Zacks Rank #5 (Strong Sell).

 

The Michaels Companies, Inc. Price and Consensus

 

Shares of the retailer are down almost 64% in the last one year. The S&P 500 is up 24.4% in comparison.

Going forward, Michaels is honing their target audience, choosing to focus on what they call Makers—craft enthusiasts who are willing to pay more for better quality products and services. The company also recently tapped former Walmart (WMT - Free Report) executive Ashley Buchanan as its new CEO and president; Buchanan served as chief merchandising officer and chief operating officer for WMT’s e-commerce segment.

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