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The Michaels Companies, Inc.

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Michaels has lagged the industry in the past three months backed by its dismal sales trend, which continued in second-quarter fiscal 2018. Notably, the company delivered negative sales surprise in 10 of the last 14 quarters. The soft sales performance is attributed to the closure of 94 full-size Aaron Brothers stores in the fiscal first quarter, which negatively impacted the second quarter, besides dismal comps. Further, the company continued to witness soft margins in the fiscal second quarter due to higher costs. Notably, this was the second straight quarter of gross margin decline, while operating margin remained soft for three consecutive quarters. However, the company’s store growth and omni-channel initiatives, along with a disciplined capital plan bode well. Further, the company has a robust earnings surprise history, having reported a beat in four of the last five quarters. The company also raised its earnings view for fiscal 2018.

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