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Michaels (MIK) Q3 Earnings Beat, Comps Gain, Stock Rallies
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The Michaels Companies, Inc. posted third-quarter fiscal 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate while sales lagged the same. However, both top and bottom lines improved year over year. Notably, comparable sales improved significantly during the quarter under review. Results gained from expanded omnichannel capabilities, customized marketing strategy and Maker-centric branding.
Also, the company announced that it will pay $10 million in one-time holiday bonuses to both full-time and part-time associates in the fourth quarter for their remarkable efforts amid the ongoing coronavirus crisis.
Markedly, shares of this Zacks Rank #3 (Hold) company rallied 20.3% during the trading session on Dec 3. The stock has gained 17.5% in the past three months compared with the industry’s growth of 2.7%.
The company is progressing well with efforts to manage inventory, streamline store operations and maintain a disciplined approach to pricing and promotions. However, management refrained from issuing any guidance for fiscal 2020, citing unprecedented impacts of COVID-19.
Q3 Numbers
Michaels’ adjusted earnings of 86 cents per share were up more than two-folds from 40 cents in the prior-year quarter. Also, the figure beat the Zacks Consensus Estimate of 59 cents.
Net sales of this arts and crafts specialty retailer grew 15.1% year over year to $1,406.2 million but fell short of the Zacks Consensus Estimate of $1,419 million. The increase in the top line can be attributed to comparable store sales growth and sales gain from additional stores opened since the end of third-quarter fiscal 2019, partly offset by a sales decline due to the closure of the wholesale business.
Strength in the core arts and crafts business contributed to quarterly growth. Moreover, the fourth-quarter sales trend seems encouraging. We note that comparable store sales rose 16.3%, driven by robust demand in both stores and e-commerce.
The company registered e-commerce growth of more than 128% year over year in the quarter on enhanced and expanded omnichannel capabilities. The company’s omnichannel efforts included new delivery options, like curbside pick-up; same day delivery; ship from store; buy online, pick-up in store, or BOPIS; in-app purchases and more.
Gross profit advanced 31.7% year over year to $581.7 million and gross margin expanded 530 basis points (bps) to 41.4%. This uptick can be attributed to occupancy cost leverage, lower promotions and the continued benefits from ongoing pricing and sourcing initiatives. SG&A expenses increased 15.6% to $373.2 million. As a percentage of sales, SG&A expenses expanded 10 bps to 26.5%.
Adjusted operating income came in at $201.6 million, surging 72% from $117.4 million in the prior-year quarter. This was mainly driven by improved gross profit, somewhat offset by a rise in SG&A expenses.
The Michaels Companies, Inc. Price, Consensus and EPS Surprise
Michaels ended the quarter with cash and equivalents of $852 million, long-term debt of $2,483.7 million and total stockholders’ deficit of $1,389.9 million. In the fiscal third quarter, the company repaid a debt of $150 million. Total merchandise inventory declined 17.8% year over year to $1,170.5 million as of Oct 31, 2020.
Further, the company generated a positive free cash flow of $380 million in the fiscal third quarter.
Hibbett Sports (HIBB - Free Report) has an expected long-term earnings growth rate of 17% and a Zacks Rank #1.
The TJX Companies (TJX - Free Report) has a long-term earnings growth rate of 10.5% and a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Michaels (MIK) Q3 Earnings Beat, Comps Gain, Stock Rallies
The Michaels Companies, Inc. posted third-quarter fiscal 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate while sales lagged the same. However, both top and bottom lines improved year over year. Notably, comparable sales improved significantly during the quarter under review. Results gained from expanded omnichannel capabilities, customized marketing strategy and Maker-centric branding.
Also, the company announced that it will pay $10 million in one-time holiday bonuses to both full-time and part-time associates in the fourth quarter for their remarkable efforts amid the ongoing coronavirus crisis.
Markedly, shares of this Zacks Rank #3 (Hold) company rallied 20.3% during the trading session on Dec 3. The stock has gained 17.5% in the past three months compared with the industry’s growth of 2.7%.
The company is progressing well with efforts to manage inventory, streamline store operations and maintain a disciplined approach to pricing and promotions. However, management refrained from issuing any guidance for fiscal 2020, citing unprecedented impacts of COVID-19.
Q3 Numbers
Michaels’ adjusted earnings of 86 cents per share were up more than two-folds from 40 cents in the prior-year quarter. Also, the figure beat the Zacks Consensus Estimate of 59 cents.
Net sales of this arts and crafts specialty retailer grew 15.1% year over year to $1,406.2 million but fell short of the Zacks Consensus Estimate of $1,419 million. The increase in the top line can be attributed to comparable store sales growth and sales gain from additional stores opened since the end of third-quarter fiscal 2019, partly offset by a sales decline due to the closure of the wholesale business.
Strength in the core arts and crafts business contributed to quarterly growth. Moreover, the fourth-quarter sales trend seems encouraging. We note that comparable store sales rose 16.3%, driven by robust demand in both stores and e-commerce.
The company registered e-commerce growth of more than 128% year over year in the quarter on enhanced and expanded omnichannel capabilities. The company’s omnichannel efforts included new delivery options, like curbside pick-up; same day delivery; ship from store; buy online, pick-up in store, or BOPIS; in-app purchases and more.
Gross profit advanced 31.7% year over year to $581.7 million and gross margin expanded 530 basis points (bps) to 41.4%. This uptick can be attributed to occupancy cost leverage, lower promotions and the continued benefits from ongoing pricing and sourcing initiatives. SG&A expenses increased 15.6% to $373.2 million. As a percentage of sales, SG&A expenses expanded 10 bps to 26.5%.
Adjusted operating income came in at $201.6 million, surging 72% from $117.4 million in the prior-year quarter. This was mainly driven by improved gross profit, somewhat offset by a rise in SG&A expenses.
The Michaels Companies, Inc. Price, Consensus and EPS Surprise
The Michaels Companies, Inc. price-consensus-eps-surprise-chart | The Michaels Companies, Inc. Quote
Financial Position
Michaels ended the quarter with cash and equivalents of $852 million, long-term debt of $2,483.7 million and total stockholders’ deficit of $1,389.9 million. In the fiscal third quarter, the company repaid a debt of $150 million. Total merchandise inventory declined 17.8% year over year to $1,170.5 million as of Oct 31, 2020.
Further, the company generated a positive free cash flow of $380 million in the fiscal third quarter.
3 Stocks to Watch in the Retail Space
DICK’S Sporting Goods, Inc. (DKS - Free Report) has a long-term earnings growth rate of 5.6% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hibbett Sports (HIBB - Free Report) has an expected long-term earnings growth rate of 17% and a Zacks Rank #1.
The TJX Companies (TJX - Free Report) has a long-term earnings growth rate of 10.5% and a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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