Michaels’ Q1 Net Jumps 47 Percent

Michaels’ Q1 net jumps 47 percent.
June 4, 2015David Gill

MichaelsIRVING, Texas-A drastic reduction in interest expense combined with a bump-up in sales to send Michaels’ first-quarter net income on a 47 percent skyrocketing, to $66.7 million.

Interest expense fell 33.8 percent, due to the refinancing of debt and the pay-down of $619 million of payment-in-kind toggle notes from proceeds of Michaels’ initial public offering in the second quarter of last year and cash flow from operations.

Net sales edged up 2.4 percent to $1.1 billion, including a gain of 0.3 percent in same-store sales. Chuck Rubin, Michaels’ chairman and CEO, said the retailer was able to push sales up in spite of unfavorable foreign exchange rates, bad weather early in the quarter and a decline in sales of Rainbow Loom product, which helped boost sales in last year’s first quarter.

Gross margin rose 25 basis points to 41 percent, helped by improved merchandise margins and leverage in occupancy costs. Selling, general and administrative expenses increased 4.1 percent in dollars and 43 basis points as a percentage of sales, to 27.1 percent.

For the second quarter, Michaels said it expects a same-store sales gain of 1 to 2 percent. The fiscal year should produce a total sales gain of from 3.2 to 3.7 percent, with a pickup of 1.5 to 2 percent in same-store sales.

“Our customers are responding well to our focus on improving the store environment, having trend-right merchandise and use of a variety of marketing approaches,” Rubin said. “This gives us confidence in our outlook for the remainder of the year, and we are reiterating our fiscal 2015 guidance.”

David GillDavid Gill | Senior Editor

David Gill covers home textiles, small electrics housewares, personal-care products, cleaning products, mattresses, consumer electronics and major appliances. He also reports on retailers and writes about the business and financial side of both vendors and retailers. He has more than 30 years of experience in business journalism, and has worked for other publications and websites that cover consumer products from both the manufacturer and retailer sides. His outside interests include sports (he is a big fan of the New York teams and of British soccer), cooking, movies and theater. He occasionally enjoys a good cigar as well.


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