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Michaels (MIK) Up More Than 74% in 3 Months on Online Strength

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Shares of The Michaels Companies, Inc. skyrocketed 74.6% in the past three months, significantly outperforming the industry’s growth of 14.7%. The stock’s bullish run on the bourses can be attributable to a solid online show, strength in the Maker strategy and strong quarterly results. Speaking of third-quarter fiscal 2020 results, the company delivered an earnings beat along with top and bottom-line improvement year over year. Also, solid performance in the core arts and crafts business contributed to quarterly growth. Management also noted that the initial fourth-quarter sales trend was encouraging, with mid-single-digit growth.

Moreover, the company remains focused on enhancing and expanding the omnichannel experience by integrating its e-commerce and in-store operations. Notably, Michaels registered e-commerce growth of more than 128% year over year in the fiscal third quarter, driven by 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. Also, e-commerce accounted for nearly 10% of third-quarter revenues.

During the third quarter, management introduced the BOPIS option to its online app. Further, the company’s new online express checkout option offers customers an even more convenient shopping experience in just four clicks. Management also foresees e-commerce sales growth to continue in the near term.

Apart from these, the company is progressing well with its customer-centric, core 'Maker' strategy, which aims at strengthening its retail foundation, boosting omnichannel experience and repositioning the business. It opened its first Maker store in McKinney, TX, which offers a personalized assortment, better layout, improved services and a host of omnichannel capabilities. Going ahead, the company plans to open more such stores in fiscal 2020. It also revamped the Michaels rewards loyalty program and reinvented its store formats with a new in-store layout, inspiration hubs and an innovative checkout design under its core Maker strategy.

Further, it is on track to maximize marketing productivity through its media-mix model, wherein it will shift to higher productivity media options such as digital and addressable TV, without increasing the spending. Michaels also implemented a pricing and promotion strategy, which is likely to help optimize discounts and improve customers’ perception of the value it offers through discounts, coupons and other promotional activities.

 

Bottom Line

Although cost headwinds and other uncertainties related to the pandemic remain concerns, we believe that this Zacks Rank #3 (Hold) stock is likely to sustain momentum on the back of a solid online show and the Maker strategy. Moreover, a VGM Score of A raises optimism in the stock.

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