Michaels Posts Slight Comp Gain In Q1

Michaels increased its net sales and income in the first quarter, beating estimates, but comps lagged. The retailer also launched a search for a new chief financial officer. 

For the first quarter ended April 30, Michaels posted net income of $70.8 million, or 34 cents per diluted share, versus $66.7 million, or 32 cents per diluted share, in the year-earlier period. Adjusted for one-time items, net income was $75.5 million, or 36 cents per diluted share, versus $66.7 million, or 32 cents per diluted share, in the quarter the year before.

Earnings per diluted share beat a Thomson Reuters analyst average estimate by a penny, but comparable store sales fell short of company guidance.

Comparable store sales advanced 0.9%, Michaels stated, or 1.4% on a constant currency basis. Net sales were $1.16 billion versus $1.08 billion in the quarter the year prior. The company noted that the sales gain primarily resulted from the acquisition of Lamrite West, a wholesale and retail arts and crafts supplier, in February 2016 and the addition of 24 stores net of closures operating during the quarter, in addition to the comp gain.

Operating income increased to $145.3 million from $144 million in the 2015 first quarter. With one-time items excluded, first quarter 2016 adjusted operating income increased 6.3% to $153 million year over year.

"I am pleased with our overall financial performance for the first quarter," said Chuck Rubin, Michaels chairman and CEO. "From a comparable store sales standpoint, the quarter got off to a strong start. We saw a very positive customer response to our Easter and spring assortment before trends softened in April, resulting in a comp shortfall for the quarter versus our initial expectations. Despite this, we expanded gross margins and leveraged expenses in the core Michaels business, driving adjusted earnings per share to the upper end of our guidance range, representing a 12.5% increase over the prior year. In addition we made progress against each of our initiatives, including the integration of Lamrite West, and we continued to make strategic investments in support of our Vision 2020 strategy."

In addition, Michaels named Charles Sonsteby to the newly created position of vice chairman of The Michaels Cos. He was chief administrative officer and CFO. In this new role, he will oversee the growth and continued integration of Lamrite West in addition to his current responsibilities. Michaels has launched a search for a new CFO, with Sonsteby continuing to serve in that role until a successor is named.

In the first quarter, Michaels opened 11 namesake stores and one new Pat Catan's store. It closed three Michaels stores and two Aaron Brothers stores. The company operates 1,204 Michaels, 115 Aaron Brothers and 33 Pat Catan's stores.