The Michaels Companies Inc. met its own guidance and analyst projections with its first-quarter sales and EPS results, and has store expansion plans.
During the first quarter of fiscal 2019, Michaels reported net sales of $1.09 billion, down 5% from $1.15 billion in the first quarter of fiscal 2018 and within the company’s previously released guidance. Earnings per share (EPS) of $0.31 were in line with Wall Street predictions and down 20% from EPS of $0.39 the same quarter a year earlier.
According to Michaels, the decrease in net sales was primarily due to the closure of the Pat Catan’s and the Aaron Brothers stores during fiscal 2018 and a 2.9% decline in same-store sales. Net income was a bright spot, rising 40% to $37.7 million from $26.9 million the prior year period.
During the fiscal year, Michaels plans to open net 20 new Michaels stores, inclusive of up to 12 Pat Catan’s stores the company plans to rebrand, reopen, and relocate 13 Michaels stores. This includes a net of one new Michaels store and relocation of two Michaels stores planned for the second quarter. During the first quarter, the company opened four new Michaels stores, closed two Michaels stores, and relocated seven Michaels stores. At the end of the first quarter of fiscal 2019, the company operated 1,260 Michaels stores.
“While our first quarter results were within our range of expectations for the quarter, we are not satisfied and are taking steps to improve our performance,” said Mark Cosby, interim CEO. “Our team is focused on improving our current sales trend, executing against our key priorities to build momentum in the second half of fiscal 2019, and refreshing our long-term growth strategy to deliver stronger growth in 2020 and beyond.”
Michaels’ guidance for fiscal 2019 excludes any restructure charges related to the Pat Catan’s store closures, any expenses associated with the transition of the company’s former CEO, and a write-off of an investment in a liquidated business. For fiscal 2019, Michaels expects net sales will be between $5.19 billion and $5.24 billion; and same-store store sales to increase between 0% and 1%.
For the second quarter of fiscal 2019, Michaels expects same-store sales to be flat to down 1.5%, with adjusted diluted EPS between $0.13 and $0.16.