Michaels Cos reports lower fourth-quarter sales

The Michaels Companies Inc. reported a decline in sales for the fourth quarter of fiscal 2019 compared to the prior-year period is due to lower comparable-store sales, the closure of Pat Catan’s stores during the fourth quarter of fiscal 2018, and a decrease in wholesale revenue. This was partially offset by sales related to 16 additional Michaels stores (net of closures) since the end of the fourth quarter of fiscal 2018, the company added. (At the end of the fourth quarter of fiscal 2019, the company operated 1,274 Michaels stores.)

Operating income was $275.0 million compared to $273.2 million in the fourth quarter of fiscal 2018. Adjusted operating income for the fourth quarter of fiscal 2019 was $278.6 million compared to $333.2 million in the fourth quarter of fiscal 2018. In light of the rapidly changing developments arising from the Coronavirus outbreak, the company is not providing a formal full-year outlook for Fiscal Year 2020.

“Our fourth-quarter results were consistent with our expectations, reflecting underlying business trends and the anticipated headwinds of a shorter holiday selling season,” said Mark Cosby, CEO, Michaels Cos. This was partially offset by improvements to our execution on seasonal transitions and events during the fourth quarter. We also made strong progress on the implementation of our ‘Maker’ strategy, which provides a clear roadmap for future growth.

“We are closely monitoring the rapidly changing developments from the Coronavirus outbreak, and Ashley is leading the efforts of our crisis team. The safety of our customers and our employees is our top priority during this challenging time. We are also assessing the potential impact on our business and, at this time, do not anticipate material supply chain disruptions during our first quarter. On the demand side, we have seen some evidence of slowing sales in certain categories and slightly increased conversion in our e-commerce business over the past few days. These are early observations and we will have more information as events unfold. In the meantime, we believe we have ample liquidity and considerable financial flexibility to navigate this uncertainty and position Michaels for future success.”

“Since joining Michaels in early January, I have focused on the areas where we can improve our execution, as well as the key initiatives that will drive us forward,” says Ashley Buchanan, Chief Executive Officer Designate. “There is more work to do, and I am committed to taking the necessary actions to improve both our operations as well as our customer experience. The path ahead will likely not be linear, but I am confident that the successful execution of our ‘Maker’ strategy will best position Michaels for sales growth, enhanced profitability and free cash flow generation in the future.”

Key Financial Results:

¹ See additional information in this release for a reconciliation of non-GAAP financial measures to the respective GAAP measures.

The company also provided the following report:

Full Year Fiscal 2019:

• The decrease in net sales was primarily due to the closure of our Pat Catan’s and Aaron Brothers stores during fiscal 2018, lower comparable store sales and a decrease in wholesale revenue. The decrease in net sales was partially offset by the operation of 16 additional Michaels stores (net of closures) during fiscal 2019.

• Operating income was $515.0 million compared to $563.6 million for the full-year fiscal 2018. Adjusted operating income for fiscal 2019 was $572.6 million compared to $671.7 million in fiscal 2018. A full reconciliation of Adjusted operating income is available within the tables of this press release.

• During fiscal 2019, the Company repurchased 11.6 million shares, or $105.1 million, under its share repurchase authorization. The total remaining authorization for future repurchases is approximately $293.5 million.

• During fiscal 2019, the Company reported cash flows from operations of $493 million, and free cash flow, defined as cash flows from operations less capital expenditures, of $373 million.

• The company ended fiscal 2019 with a cash balance of $410 million and considerable borrowing capacity remaining under its revolving credit facility.