The Michaels Companies announces first quarter sales down 28%

The Michaels Companies, Inc. announced first-quarter next sales of $799 million, compared to $1.09 billion last year, a decline of 27.6%. The company had a first-quarter net loss $63.5 million, compared to $37.7 million net income in 2019.

The 27% decline in sales was due to temporary store closures as a result of the COVID-19 pandemic. Sales related to 11 additional Michaels stores (net of closures) since the end of the first quarter of fiscal 2019 and an increase in e-commerce sales of $118.8 million or nearly 300%, partially offset the decline. The company introduced new omnichannel capabilities including curbside pick-up and same-day delivery, expanded ship from store and BOPIS and enabled in-app purchases; these actions helped drive 296% e-commerce growth in the first quarter, the company said.

“During an unprecedented time, our teams quickly adapted and executed on key priorities for our business,” says Ashley Buchanan, CEO, Michaels Inc. “While temporary store closures negatively impacted our first-quarter results, I am proud of the way our team responded to changing market conditions, implementing safety and business continuity measures to protect the health of our associates while continuing to safely service the needs of our customers. This quarter, we significantly accelerated Michaels’ transformation into an omnichannel retailer by introducing a robust set of customer-facing digital and fulfillment capabilities. As we reopen stores, we are encouraged by the trends we are seeing. Moving through the rest of the year, we will continue to introduce additional capabilities that enable us to serve customers wherever and however they want to shop. We believe these actions, along with our strong liquidity, will enable us to successfully navigate the current environment and emerge a healthier, stronger and better positioned omnichannel company.”

Key Financial Results:

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

Outlook

Following the completion of a strategic review, the company announced plans to close its Darice wholesale operations. The company will retain a sourcing-related office in China and expects the closure process to be substantially completed by Nov. 30, 2020. The company anticipates the fiscal year 2020 after-tax, primarily non-cash, cost of the closure to be in the range of $46 million to $52 million, consisting primarily of the liquidation of inventory, employee-related expenses and costs associated with the write-off of intangible assets.

As of June 4, 2020, approximately 1,000 stores were open and fully operational. Based on the current state and local laws and guidance, the company anticipates substantially all 1,273 Michaels stores will be open by the end of June 2020.