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Factors Likely to Decide Michaels' (MIK) Fate in Q4 Earnings

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The Michaels Companies, Inc. (MIK - Free Report) is slated to report fourth-quarter fiscal 2019 results on Mar 17, before the opening bell. The company delivered a negative earnings surprise of 18.4% in the last reported quarter. However, its bottom line beat estimates by 4.5%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s fiscal fourth-quarter earnings is pegged at $1.26, which suggests a 12.5% increase from the year-ago quarter’s reported figure. Notably, the consensus mark has been unchanged in the past 30 days. The consensus estimate for fiscal fourth-quarter sales is pegged at $1,729 million, indicating a 3.4% decline from the prior-year quarter’s reported number.

For fiscal 2019, the consensus mark for revenues is pegged at $5.08 billion, with earnings of $2.12 per share.

The Michaels Companies, Inc. Price and EPS Surprise

 

The Michaels Companies, Inc. Price and EPS Surprise

The Michaels Companies, Inc. price-eps-surprise | The Michaels Companies, Inc. Quote

Key Factors to Note

Michaels has been witnessing soft margins, owing to lower merchandise margin along with occupancy and distribution expense deleverage. Further, the decline in comparable store sales (comps) due to lower customer transactions along with soft wholesale revenues has been weighing on its top-line performance.

On the last earnings call, management had projected a comps decline of 2-3% for the fiscal fourth quarter, considering existing business trends, a shorter holiday selling season and a potential adverse impact from the liquidation of A.C. Moore retail stores. Adjusted operating income is estimated to be $271-$281 million. Further, adjusted earnings are envisioned to be $1.21-$1.27 per share.

Moreover, the company anticipates continued pressures from an uncertain tariff environment to have weighed on its quarterly performance. Tariff-related headwinds have been hurting Michaels’ inventory per store and merchandise margin.

However, the company has been delivering strong e-commerce sales, fueled by higher traffic and conversion rates. Moreover, its plans to improve marketing productivity are likely to have reduced expenses in the fiscal fourth quarter.

The company has embarked on a customer-centric, core 'Maker' strategy, which is aimed at building the business better, leveraging digital and data, and repositioning the business. Also, its e-commerce operations have been benefiting from the “Buy Online Pick Up in Store” (“BOPUS”) strategy.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Michaels this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Michaels carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Five Below, Inc. (FIVE - Free Report) presently has an Earnings ESP of +0.32% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place, Inc. (PLCE - Free Report) currently has an Earnings ESP of +1.16% and a Zacks Rank #3.

RH (RH - Free Report) has an Earnings ESP of +1.61% and a Zacks Rank #3 at present.

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