Michaels Stores (MIK) shares rose 10% Thursday after the arts and crafts retailer reported better-than-expected sales and profit for the fourth quarter, giving investors reason to believe big investments in its stores are paying off.
The retailer reported revenue of $1.68 billion for the quarter ended Jan. 30, exceeding Wall Street forecasts for $1.67 billion. Comparable sales, a metric that strips out the effect of newly opened or closed stores, rose 4.7% when not counting the impact of a weaker Canadian dollar. Profit per share was 87 cents, 3 cents better than expected.
CEO Chuck Rubin in a statement credited better in-store experience and a better assortment for the results. Dallas-area based Michaels has in the last year refreshed many of its stores, takings steps like lowering aisle heights to improve sight lines, reducing visual clutter with less signage, and offering Wi-Fi.
Investors should take whatever relief they can get. Michaels gave a tepid outlook for 2016, forecasting comparable sales would rise, at most, 2.7% this year. The retailer also said that challenges that hurt it in 2015 such as “pressure from foreign exchange rates and a choppy retail environment” would continue this year.
And Rubin told analysts not to expect e-commerce to ever be a big boon for Michaels, saying it would contribute a mid-single digit percentage of total sales at most at one point. “E-commerce just doesn’t play given the nature of this business without any big powerful national brands and the tactile nature of the business,” he said.
So the rise on Thursday was a bit of a relief rally—Michaels shares had fallen 16% in the last year through Wednesday.
