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Michaels Companies Q1 sales down 27%

Christian Fernsby ▼ | June 8, 2020
The Michaels Companies announced financial results for the first quarter fiscal 2020 ended May 2, 2020.
Michaels Companies
Michaels Companies   Total comparable store sales decreased 27.6%
First Quarter Fiscal 2020:

Topics: Michaels Companies

The 27% decline in sales for the first quarter of fiscal 2020 compared to the prior year period was due to temporary store closures as a result of the coronavirus pandemic. Sales related to 11 additional Michaels stores (net of closures) since the end of the first quarter of fiscal 2019 and an increase in e-commerce sales of $118.8 million or nearly 300%, partially offset the decline. Total comparable store sales decreased 27.6%.

Operating loss was $60.7 million compared to operating income of $92.7 million in the first quarter of fiscal 2019. Adjusted operating loss for the first quarter of fiscal 2020 was $60.7 million compared to $101.4 million in adjusted operating income in the first quarter of fiscal 2019. A full reconciliation of Adjusted operating (loss)/income is available within the tables of this press release.

Balance sheet and liquidity highlights:

The Company proactively drew down $600 million under its revolving credit facility in March 2020 and ended the first quarter of fiscal 2020 with a cash balance of $926.8 million.

Subsequent to the end of the first quarter, the Company paid down $300 million on the revolving credit facility, leaving it with significant available borrowing capacity.

The Company expects to have sufficient liquidity to fund planned capital expenditures, working capital requirements, debt service requirements and anticipated growth for the foreseeable future.

Outlook:

Following the completion of a strategic review, on May 14, 2020 the Company announced that it plans to close its Darice wholesale operations. The Company will retain a sourcing-related office in China and expects the closure process to be substantially completed by November 30, 2020. The Company anticipates the fiscal year 2020 after-tax, primarily non-cash, cost of the closure to be in the range of $46 million to $52 million, consisting primarily of the liquidation of inventory, employee-related expenses and costs associated with the write-off of intangible assets.

As of June 4, 2020, approximately 1,000 stores were open and fully operational. Based on the current state and local laws and guidance, the Company anticipates substantially all 1,273 Michaels stores will be open by the end of June 2020.

Based on current trends, the Company believes it will use cash during its fiscal second quarter. Expected uses of cash during the second quarter include seasonal working capital and cash payments that were deferred from the first quarter. The Company expects to generate positive cash flow in the second half of fiscal 2020 and believes it has sufficient liquidity for the foreseeable future.


 

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