Michaels Q1 earnings, sales miss as competition heats up

Increased online and offline competition is giving arts and crafts leader Michaels Cos. a run for its money.



The company's net profit rose 2% to $72.2 million, compared to a profit of $70.8 million in the year ago period.



Total sales were flat at $1.16 billion, also less than expected. Same-store sales fell 1.2%



Neil Saunders, managing director of GlobalData Retail, commented that Michaels is suffering from increased competition in the crafting market, with a rise in the number of occasional crafters using "generalist players," including ordering directly from Amazon. Hobby Lobby is also a threat, according to Saunders, with customers ranking it higher than Michaels across a whole range of metrics from service to range breadth and depth.



"Price is also a comparative area of weakness for Michaels, and we believe that the company needs to sharpen its value message," Saunders said. "While Michaels has traditionally used coupons and occasional of-fers to drive custom, this is perceived less favorably than Hobby Lobby’s approach of regular sales and discounts and is, consequently, a much weaker driver of traffic.



Michaels said it expects full-year earnings to be $2.03 to $2.15 per share.



“Our operational expectations for the remainder of 2017 have not changed," said Chuck Rubin, chairman and CEO. “We continue to be-lieve that top-line trends will improve in the second half as we anniver-sary the 2016 coloring headwind, disruption created from store layout changes made in the third quarter last year, and the U.S. elections. How-ever, the value of the Canadian dollar has weakened since we established our prior outlook, and we have adjusted our fiscal 2017 full year guid-ance to reflect our expectation this currency trend continues.”



As of April 29, 2017, the company owned and operated 1,364 stores in 49 states and Canada under the brands Michaels, Aaron Brothers, and Pat Catan’s.