IRVING, Texas, Jan. 5 /PRNewswire-FirstCall/ -- Michaels Stores, Inc.
(NYSE: MIK) today reported holiday sales performance and has updated its same-
store sales and earnings outlook for the fourth quarter and full year of
fiscal 2005. Fiscal fourth quarter-to-date same-store sales through
December 31, 2005 increased 3.1% and total sales increased 7.2%, over the
corresponding period last year. Considering actual same-store sales
performance to-date for the fourth quarter and the January sales forecast, the
Company currently expects same-store sales for the fourth quarter to increase
from 2.5% to 3.5% over the same period last year and total sales for the
fourth quarter to increase approximately 6.5% to 7.5%.
Same-store sales for the combined November and December holiday selling
season were strongest in the Pacific, Southeast, and Southwest regions of the
country. The best performing categories included Jewelry/Beading,
Candles/Bakeware, Kids Crafts and Art. For the combined November and December
period, average ticket increased 3.7%, and customer transactions were down
0.3%. Same-store sales for this holiday period were negatively affected by
30 basis points due to the timing of custom frame deliveries versus the
comparable prior year period.
Michael Rouleau, Chief Executive Officer, stated, "We are pleased with
our sales performance during this holiday period. Our organization drove
solid mid-single digit same-store sales results this December, which is quite
an accomplishment considering our impressive 14% same-store sales performance
last December. Our successful 2005 merchandising resets in the General
Crafts, Jewelry/Beading, Stickers/Stamps, Bakeware, and Yarn categories helped
fuel our strong sales performance with sales in our Christmas seasonal
department consistent with last year on a comparable store basis.
Additionally, our expanded Gift Giving program, supported by our first ever
national radio advertising program, drove sales in our Kids Crafts and Art
departments during December."
Mr. Rouleau continued, "Although we are pleased with our sales results
this holiday season, we had to address several issues during November and
December. In general, the consumer shopped later this holiday season. In
spite of solid sales increases over the Thanksgiving weekend, sales were soft
early in the holiday season, until mid-December, when customer traffic levels
increased significantly. The consumer also appeared to be more value
oriented, responding strongly to enhanced promotional events such as the
Thanksgiving weekend and after-Christmas events, as well as gravitating to our
strongest value offerings late in the holiday selling period. As a result of
these consumer shopping patterns, our gross margin rate on promotional sales
was lower than in the comparable period last year. In addition, due to slow
sales of a limited number of Fashion Yarn items, we decided to aggressively
promote these items during this high traffic and high demand period and expect
to start fiscal 2006 with a stronger overall Yarn assortment. These issues
are expected to result in a reduction in the gross margin expansion we
originally forecasted for the fourth quarter."
Mr. Rouleau concluded, "Importantly, as we complete fiscal 2005, we
continue to experience solid performance in a number of core businesses, such
as Scrapbooking, Jewelry & Beading, General Crafts, Kids Crafts, and Yarn.
Overall, we expect to finish fiscal 2005 by delivering our ninth year of
record operating results, and expect to be well positioned for our tenth
consecutive record year as we enter fiscal 2006."
Outlook
For the fourth quarter of fiscal 2005, under the Company's current retail
inventory method of accounting for merchandise inventories, diluted earnings
per share are currently expected to range from $0.83 to $0.87, representing an
increase of 11% to 16% over the prior year fourth quarter diluted earnings per
share of $0.75. The gross margin rate, as a percent of sales, for the fourth
quarter is presently expected to expand by approximately 110 basis points over
the fourth quarter of the prior year and operating income as a percent of
sales is expected to expand by approximately 80 basis points.
For fiscal 2005, full year same-store sales are expected to increase 3% to
4% and total sales are expected to increase approximately 8%. For the full
year, under the Company's current retail inventory method of accounting,
operating margin is expected to expand by 130 basis points over the prior
year, and diluted earnings per share are forecast to range from $1.79 to
$1.83, representing growth of 23% to 26% over fiscal 2004 diluted earnings per
share of $1.45.
Accounting Change
As previously announced on November 22, 2005, the Company intends to
change its method of accounting for merchandise inventories during the fourth
quarter of fiscal 2005 from its current retail inventory method to the
weighted average cost method. Assuming this new method is adopted during the
fourth quarter, the cumulative effect of the accounting change will be
recorded as of the beginning of fiscal 2005 and the full year impact of the
accounting change will be reflected in the Company's results of operations
reported in its year end earnings press release and annual report on Form 10-
K. Pro forma information comparing both methods will also be presented.
Diluted earnings per share for fiscal 2005 under the weighted average cost
method, before the cumulative effect of accounting change, are expected to
range from $1.72 to $1.76.
The Company plans to release its 2005 fourth quarter sales results on
Thursday, February 2, 2006, at 6:30 a.m. CT and its 2005 fourth quarter
earnings results on Wednesday, March 8, 2006 at 4:00 p.m. CT. Any interested
party may view the Company's press releases at http://www.michaels.com .
Michaels Stores, Inc. is the world's largest specialty retailer of arts,
crafts, framing, floral, wall decor, and seasonal merchandise for the hobbyist
and do-it-yourself home decorator. As of January 5, 2006, the Company owns
and operates 889 Michaels stores in 48 states and Canada, 166 Aaron Brothers
stores, 11 Recollections stores and four Star Wholesale operations.
This document may contain forward-looking statements that reflect our
plans, estimates, and beliefs. Any statements contained herein (including, but
not limited to, statements to the effect that Michaels or its management
"anticipates," "plans," "estimates," "expects," "believes," and other similar
expressions) that are not statements of historical fact should be considered
forward-looking statements and should be read in conjunction with our
consolidated financial statements and related notes in our Annual Report on
Form 10-K for the fiscal year ended January 29, 2005, and in our Quarterly
Reports on Form 10-Q for the quarters ended April 30, 2005, July 30, 2005 and
October 29, 2005. Specific examples of forward-looking statements include,
but are not limited to, forecasts of same-store sales growth, operating
income, cumulative effect of change in accounting principle, estimates of the
annual impact of the weighted average cost method of accounting for inventory
relative to our current retail inventory method, net income, and diluted
earnings per share. Our actual results could differ materially from those
discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to: our ability to
remain competitive in the areas of merchandise quality, price, breadth of
selection, customer service, and convenience; our ability to anticipate and/or
react to changes in customer demand; changes in consumer confidence;
unexpected consumer responses to promotional programs; unusual weather
conditions; the execution and management of our store growth and the
availability of acceptable real estate locations for new store openings; the
effective maintenance of our perpetual inventory and automated replenishment
systems and related impacts to inventory levels; delays in the receipt of
merchandise ordered from our suppliers due to delays in connection with either
the manufacture or shipment of such merchandise; transportation delays
(including dock strikes and other work stoppages); changes in political,
economic, and social conditions; commodity, energy and fuel cost increases,
currency fluctuations, and changes in import duties; our ability to maintain
the security of electronic and other confidential information; our ability to
establish effective internal control over financial reporting for inventories
and cost of sales under our proposed weighted average cost method; financial
difficulties of any of our insurance providers, key vendors, or suppliers; and
other factors as set forth in our Annual Report on Form 10-K for the fiscal
year ended January 29, 2005, particularly in "Critical Accounting Policies and
Estimates" and "Risk Factors," and in our other Securities and Exchange
Commission filings. We intend these forward-looking statements to speak only
as of the time of this release and do not undertake to update or revise them
as more information becomes available.
This press release is also available on the Michaels Stores, Inc. website
(http://www.michaels.com ).
SOURCE Michaels Stores, Inc.
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CONTACT:
Lisa K. Klinger, Vice President - Treasurer
and Investor Relations of Michaels Stores, Inc., +1-972-409-1528,
or klingerl@michaels.com
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