Michaels Guidance Weighs on Q4 Results

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Michaels Companies Inc. (NASDAQ: MIK) released its fiscal fourth-quarter financial results before the markets opened on Thursday. The arts and crafts retailer posted $1.19 in earnings per share (EPS) on $1.89 billion in revenue. That compares with consensus estimates of $1.19 in EPS on revenue of $1.88 billion. The same period from last year had as well as the EPS of $0.96 and $1.75 billion in revenue reported a year ago.

The most recent comparable store sales increased 2.5% (2.0% on a constant currency basis) due to an increase in average ticket and an increase in customer transactions.

In the quarter, Michaels completed its strategic review of Aaron Brothers, a small, specialty retail chain. In 2018, the company plans to close 94 full-size Aaron Brothers stores and reposition Aaron Brothers as a “store-within-a-store,” providing custom framing services in all Michaels stores. Aaron Brothers net sales totaled approximately $110 million in fiscal 2017 and had no material impact on the company’s operating income.

Looking ahead to the fiscal first quarter, Michaels expects to see EPS in the range of $0.36 to $0.38, net sales between $1.139 billion and $1.150 billion, and comparable sales flat to up 1%. Consensus estimates call for $0.46 in EPS on $1.18 billion in revenue for the quarter.

On the books, Michaels cash and cash equivalents totaled $425.9 million at the end of the quarter, up from $298.8 million in the same period of last year.

Chuck Rubin, board chair and chief executive, commented:

Today, we reported record fourth quarter results driven by a strong holiday performance. Customers responded well to our efforts to make it easier to celebrate the season with an expanded offering of new and exclusive product, more compelling presentations, and strong value statements. In fiscal 2017, we made meaningful progress against each of our strategic priorities, including: delivering a more seamless omnichannel shopping experience; offering trend-right assortments that deliver great customer value; and increasing customer engagement. As I look back at our financial performance for the full year, I am pleased that we delivered sales and earnings growth in-line with the guidance we provided at the beginning of the year and that we continued to generate strong, consistent cash flow.

Shares of Michaels were down about 10% early Thursday to $19.05. The consensus analyst price target is $26.64 and the 52-week trading range is $17.25 to $27.87.

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