IRVING, Texas, Aug. 3 /PRNewswire-FirstCall/ -- Michaels Stores, Inc.
(NYSE: MIK) reported today that total sales for the second quarter were
$768.3 million, a 3.1% increase over last year's $745.5 million. Same-store
sales for the quarter declined (0.3%) on a 2.9% increase in average ticket,
a (2.6%) decrease in transactions, and a (0.6%) decrease in custom frame
deliveries. Year-to-date sales of $1.601 billion increased 2.2% from $1.567
billion for the same period last year. Same-store sales year-to-date were
down (1.7%) over the same period a year ago on a (3.8%) decrease in
transactions and a 2.1% increase in average ticket. A favorable Canadian
currency translation added approximately 0.6% to the average ticket
increase for the second quarter and approximately 0.5% for the first six
months of fiscal 2006.
The Company reported that same-store sales were affected by ongoing
programs to reduce the level of promotional and clearance sales, as well as
a considerable reduction in average per store clearance and discontinued
inventory during the quarter. On a same-store sales basis, promotional and
clearance sales declined significantly during the quarter, in part due to
the lower clearance and discontinued inventory levels, the elimination of a
highly promotional Custom Frame event and a reduction in the breadth of
promotions in the Floral department. The decrease in promotional and
clearance sales on a same-store basis was almost entirely offset by a solid
increase in regular price sales on a same-store basis for the quarter.
For the second quarter, the Southeast, Southwest, and Northeast zones
delivered the strongest relative domestic same-store sales performances in
Michaels stores. The Company's strongest category performances came in
General Crafts, primarily driven by Jewelry and Beads, Apparel Crafts,
Impulse, and Kids Crafts businesses.
The Company currently expects fiscal 2006 second quarter diluted
earnings per share to range from approximately $0.15 to $0.17, inclusive of
a number of incremental items for 2006. This represents an increase of 25%
to 42% over the prior year period. Note that fiscal 2005 second quarter
results include an incremental charge of $0.05 per diluted share related to
the Company's early redemption of its 91/4% Senior Notes in July 2005. The
Company's fiscal 2006 second quarter results are currently expected to
include legal and professional services expenses totaling approximately $3
million, on a pre-tax basis, for its review of stock option practices and
its investigation efforts related to governmental inquiries. In addition,
the Company's second quarter forecast includes approximately $8 million on
a pre-tax basis for additional costs related to the Company's review of
strategic alternatives and proposed merger transaction. The financial
impact of the additional expenses and lower than anticipated sales levels
are expected to be partly offset by a stronger than expected expansion in
gross margin during the quarter.
As previously announced on June 30, 2006, following a comprehensive
review of strategic alternatives that began on March 20, 2006, the Board of
Directors approved a transaction to recapitalize the Company with
investment by two leading global private investment firms, Bain Capital and
The Blackstone Group. Under the terms of the agreement, following the
transaction Bain Capital and Blackstone will own substantially all of the
outstanding shares of Michaels Stores, and the shareholders will receive
$44 per share in cash, representing a transaction value of more than $6
billion. Completion of the transaction is contingent on regulatory review
and approval by the shareholders of Michaels Stores and is expected to
occur by the end of the calendar year.
The Company plans to release its fiscal 2006 second quarter earnings
results on Wednesday, August 23, 2006, and will conduct a conference call
at 4:00 p.m. CT on that date, hosted by Michaels Stores President and CFO,
Jeffrey Boyer, and President and COO, Gregory Sandfort. Those who wish to
participate in the call may do so by dialing 973-633-6740. Any interested
party will also have the opportunity to access the call via the Internet at
http://www.michaels.com. To listen to the live call, please go to the website at
least fifteen minutes early to register and download any necessary audio
software. For those who cannot listen to the live broadcast, a recording
will be available for 30 days after the date of the event. Recordings may
be accessed at http://www.michaels.com or by phone at 973-341-3080, PIN 6885488.
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 August 3, 2006, the
Company owns and operates 906 Michaels stores in 48 states and Canada, 165
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 28, 2006,
and in our Quarterly Report on Form 10-Q for the quarter ended April 29,
2006. Specific examples of forward-looking statements include, but are not
limited to, forecasts of same-store sales growth, operating 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 changes in
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; financial
difficulties of any of our insurance providers, key vendors, or suppliers;
our ability to obtain regulatory approval of the merger transaction;
lawsuits asserted by our stockholders or others challenging the merger
transaction; disruptions from the merger transaction, including the
potential diversion of management's attention to completion of the
transaction and away from execution of existing business plans and the
potential loss of employees or business partners because of perceived
uncertainties; and other factors as set forth in our Annual Report on Form
10-K for the fiscal year ended January 28, 2006, 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,
klingerl@michaels.com
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