Momentum Stock in Focus: The Michaels Companies, Inc.’s (NASDAQ: MIK)

On 12 Sep 2019, The Michaels Companies, Inc.’s (NASDAQ: MIK) shares price traded between $8.75 and $9.52 during the last trading session above/below with -5.13% at $9.24. The shares recorded a trading volume 7,300,500 shares as compared to its average volume of 3,759,609 shares. Over the one year trading period, the stock has a peak price of $18.04 and its down is recorded at $4.96.

The Michaels Companies, Inc. (MIK) recently stated diluted earnings per share for the second quarter of fiscal 2019 of $0.16, or $0.19 per adjusted diluted share not including a charge associated with closing the Pat Catan’s stores and costs related to the redemption of our 2020 Senior Subordinated Notes and issuance of our 2027 Senior Notes. This compares to diluted earnings per share for the second quarter of fiscal 2018 of $0.15, or $0.15 per adjusted diluted share not including a charge associated with the restructure of Aaron Brothers and adjustments for early extinguishments of debt and refinancing costs.

Second Quarter Highlights

Net sales were $1,033.7M contrast to $1,053.3M in the second quarter of fiscal 2018. The decrease in net sales was primarily Because of the closure of the Pat Catan’s stores in fiscal 2018, partially offset by a 0.3% increase in comparable store sales and sales from the operation of 11 additional Michaels stores (net of closures) during the quarter. During the second quarter, the Company opened four new Michaels stores, closed two Michaels stores, and relocated one Michaels store. At the end of the second quarter of fiscal 2019, the Company operated 1,262 Michaels stores.

Gross profit was 35.5% of net sales in the second quarter of fiscal 2019 contrast to 35.4% in the second quarter of fiscal 2018. The 10 basis point increase was primarily Because of benefits from our ongoing pricing and sourcing initiatives and improved occupancy cost leverage. The increase was offset by the impact of tariffs on inventory we purchase from China, a raise in promotional activity and a change in sales mix.

Selling, general and administrative expense including store pre-opening costs and restructure charges (“SG&A”) was $295.7M in the second quarter of fiscal 2019 contrast to $299.1M in the second quarter of fiscal 2018. The decrease was primarily Because of lower expenses related to the closure of the Pat Catan’s stores.

Operating income was $71.3M contrast to $74.3M in the second quarter of fiscal 2018. Not Including the restructure charge associated with the closing of the Pat Catan’s stores, adjusted operating income for the second quarter of fiscal 2019 was $75.2M. This compares to adjusted operating income in the second quarter of fiscal 2018 of $71.1M, not including the $3.2M gain in the quarter primarily related to the settlement of lease obligations associated with the closure of 94 full-size Aaron Brothers stores that took place in the first quarter of fiscal 2018.

On July 8, 2019, the issuance of $500M of our 2027 Senior Notes was completed and the proceeds, together with cash on hand, were used to redeem our 2020 Senior Subordinated Notes. Interest expense increased $3.0M to $40.1M, from $37.1M in the second quarter of fiscal 2018, due primarily to interest on our new 2027 Senior Notes, higher LIBOR rates associated with the Company’s variable rate Amended and Restated Term Loan Credit Facility and double interest incurred when both our 2020 Senior Subordinated Notes and 2027 Senior Notes were outstanding for 21 days. On August 30, 2019, the Amended Revolving Credit Facility was amended to extend the maturity to August 2024.

MIK quick ratio for most recent quarter was 0.20 while current ratio for time period was 1.20. During the twelve month it lost -46.37% and year to date performance of -31.76%.

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