IRVING, Texas, Nov. 23 /PRNewswire-FirstCall/ -- Michaels Stores, Inc.
(NYSE: MIK) today reported record financial results for its third quarter and
the nine months ended October 30, 2004. Net income for the quarter was
$42.5 million, an 11% increase compared to net income of $38.2 million in the
same period last year. On a post-split basis, diluted earnings per share for
the quarter were $.31 compared to $.27 in the same period last year, a 15%
increase.
Net income for the nine months was $98.6 million compared to net income of
$83.3 million in the same period last year, an 18% increase. Diluted earnings
per share for the nine months, on a post-split basis, were $.71 compared to
$.60 in the same period last year, an 18% increase.
Michael Rouleau, President and Chief Executive Officer, said, "We are
pleased with our third quarter performance and our progress year-to-date, and
we are looking forward to another record year, our eighth in a row."
Operating Performance
Total sales for the third quarter increased 6% to $799.9 million from
$755.2 million for the same period last year. Same-store sales for the
quarter grew 1%. For the quarter, customer traffic was up 2% and average
ticket decreased 1%. For the quarter, the Company's best performing
departments were Needlework and Yarn, Impulse, Books, and Kids Crafts, and its
best performing zones were the Pacific, Central, and mid-Atlantic.
Year-to-date sales of $2.209 billion increased 9% from $2.028 billion for
the same period last year while same-store sales were up 4% year-to-date.
Year-to-date, customer traffic increased 3% and average ticket was up 1%.
Year-to-date, the Company's best-performing departments were Needlework and
Yarn, Art, Frames, and Kids Crafts and its best performing zones were the
Central, Pacific, and Northeast.
During the third quarter, the Company opened 22 and relocated eight
Michaels stores, opened four and relocated one Aaron Brothers store, and
opened three Recollections stores.
For the quarter ended October 30, 2004, the Company's operating income
increased 14% to $72.8 million or 9.1% of sales compared to operating income
of $63.6 million or 8.4% of sales for the same period last year. Operating
income year-to-date increased 16% to $172.3 million or 7.8% of sales compared
to $148.6 million or 7.3% of sales in the same period of 2003. Year-to-date
operating income includes a $4.9 million charge recorded in the second quarter
related to the establishment of insurance reserves reflecting the financial
difficulties of one of the Company's insurance carriers. Operating income
also includes incremental costs related to previously announced initiatives
for additional closure costs related to store relocations this year, the
distribution center realignment project, and Aaron Brothers' headquarters
relocation to the Michaels corporate offices in Coppell, TX. Expenses related
to these projects were $4.9 million in the third quarter and $9.7 million
year-to-date.
Balance Sheet
The Company's cash balance as of October 30, 2004, the end of the third
quarter, was $272.4 million, an increase of $166.9 million over the same
period last year. Average inventory per Michaels store at the end of the
third quarter, inclusive of distribution centers, decreased 8% to
$1.213 million from $1.313 million for the same period last year.
On a post-split basis, the Company has repurchased 1,451,300 shares of its
common stock during the third quarter under its stock repurchase plans at an
average price of $27.19 per share. Year-to-date, on a post-split basis, the
Company has repurchased 3,590,500 shares of its common stock at an average
price of $26.34 per share. As of November 23, 2004, under its repurchase
plans, the Company is authorized to repurchase approximately 2.3 million
additional shares plus such shares as may be repurchased with proceeds from
the future exercise of options under the Company's 2001 General Stock Option
Plan.
The Company also stated that during the third quarter it amended the terms
of its $200 million Revolving Credit Agreement to extend the maturity date
from April 30, 2005, to April 30, 2006, and to permit the planned prepayment
of its $200 million 91/4% Senior Notes on the first available call date in
July 2005.
Outlook
The Company has adjusted its fourth quarter forecast. Same-store sales
are now expected to increase 2% to 3% with November same-store sales expected
to be down 2% to 4%. Changes in its Veterans Day promotional event negatively
impacted top-line sales performance while delivering stronger than planned
gross margins. The Company continues to expect December same-store sales to
increase 4% to 6% and January same-store sales to increase 3% to 5%.
The Company currently expects diluted earnings per share, on a post-split
basis, to be at the low-end of its previous guidance of $.74 to $.76 for the
fourth quarter and to range from $1.44 to $1.46 for fiscal 2004, inclusive of
the $4.9 million charge recorded in the second quarter.
On a preliminary basis, the Company expects fiscal 2005 diluted earnings
per share to increase at least 15% over fiscal 2004 results. Same-store sales
are expected to increase 3% to 4% and total sales are expected to increase 7%
to 9% compared to fiscal 2004. Operating margin is expected to grow 60 to
80 basis points over fiscal 2004 driven by both gross margin expansion and
selling, general, and administrative expense leverage.
A conference call will be held at 4:00 p.m. CT today to discuss third
quarter earnings results. 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 replay will be available for 30 days after the
date of the event. Replay may be accessed at http://www.michaels.com or by
phone at 973-341-3080, PIN 4251275.
The Company plans to release its November 2004 sales results on Thursday,
December 2, 2004 at 6:30 a.m. CT. Any interested party may view the Company's
press release 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 November 23, 2004, the Company owns
and operates 849 Michaels stores in 48 states and Canada, 164 Aaron Brothers
stores, eight Recollections stores, and three Star Wholesale operations.
This document contains 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 31, 2004, and in our Quarterly
Reports on Form 10-Q for the quarters ended May 1, 2004, and July 31, 2004.
Specific examples of forward-looking statements include, but are not limited
to, forecasts of same-store sales growth 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 patterns; 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 cost increases and currency issues; 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 31, 2004, particularly in "Critical Accounting Policies" 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 ).
- Tables follow -
Michaels Stores, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(Preliminary and Unaudited)
Quarter Ended Nine Months Ended
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
Net sales $799,905 $755,246 $2,208,691 $2,028,150
Cost of sales and
occupancy expense 504,236 479,471 1,395,492 1,282,807
Gross profit 295,669 275,775 813,199 745,343
Selling, general, and
administrative expense 220,489 208,474 633,348 589,741
Store pre-opening costs 2,408 3,702 7,534 7,045
Operating income 72,772 63,599 172,317 148,557
Interest expense 5,042 5,049 15,439 15,185
Other (income) and
expense, net (1,077) 77 (2,743) (1,501)
Income before income
taxes 68,807 58,473 159,621 134,873
Provision for income
taxes 26,319 20,265 61,055 51,589
Net income $42,488 $38,208 $98,566 $83,284
Earnings per common share:
Basic $0.31 $0.28 $0.72 $0.62
Diluted $0.31 $0.27 $0.71 $0.60
Weighted average shares
outstanding:
Basic 135,550 134,622 136,138 134,044
Diluted 138,796 141,698 139,257 139,924
Dividends per common share $0.07 $0.05 $0.19 $0.10
Michaels Stores, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Preliminary and Unaudited)
October 30, January 31, November 1,
2004 2004 2003
ASSETS
Current assets:
Cash and equivalents $272,406 $341,825 $105,477
Merchandise inventories 1,096,400 892,923 1,103,527
Prepaid expenses and other 34,633 29,198 28,979
Deferred and prepaid income taxes 19,471 19,426 20,380
Total current assets 1,422,910 1,283,372 1,258,363
Property and equipment, at cost 863,421 808,230 779,440
Less accumulated depreciation (469,867) (420,313) (402,628)
393,554 387,917 376,812
Goodwill 115,839 115,839 115,839
Other assets 16,810 14,519 13,603
132,649 130,358 129,442
Total assets $1,949,113 $1,801,647 $1,764,617
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $257,023 $172,708 $220,349
Accrued liabilities and other 222,248 194,395 189,976
Income taxes payable 6,066 2,377 3,916
Total current liabilities 485,337 369,480 414,241
9 1/4% Senior Notes due 2009 200,000 200,000 200,000
Deferred income taxes 27,550 28,241 21,515
Other long-term liabilities 41,256 36,628 34,004
Total long-term liabilities 268,806 264,869 255,519
754,143 634,349 669,760
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.10 par value,
2,000,000 shares authorized; none
issued --- --- ---
Common Stock, $0.10 par value,
350,000,000 shares authorized;
shares issued and outstanding of
135,093,810 at October 30, 2004,
135,995,134 at January 31, 2004,
and 135,555,608 at November 1, 2003 13,509 13,600 13,556
Additional paid-in capital 438,850 489,110 503,410
Retained earnings 733,069 660,365 572,511
Accumulated other comprehensive
income 9,542 4,223 5,380
Total stockholders' equity 1,194,970 1,167,298 1,094,857
Total liabilities and stockholders'
equity $1,949,113 $1,801,647 $1,764,617
Michaels Stores, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Preliminary and Unaudited)
Nine Months Ended
October 30, November 1,
2004 2003
Operating activities:
Net income $98,566 $83,284
Adjustments:
Depreciation 65,756 61,632
Amortization 294 299
Other 780 844
Changes in assets and liabilities:
Merchandise inventories (203,477) (294,109)
Prepaid expenses and other (5,435) (10,340)
Deferred income taxes and
other 757 2,435
Accounts payable 84,315 125,585
Income taxes payable 16,917 (6,432)
Accrued liabilities and
other 33,157 14,036
Net cash provided by
(used in) operating activities 91,630 (22,766)
Investing activities:
Additions to property and equipment (71,663) (69,333)
Net proceeds from sales of
property and equipment 60 31
Net cash used in
investing activities (71,603) (69,302)
Financing activities:
Proceeds from stock options
exercised 28,944 28,556
Repurchase of Common Stock (94,582) (37,369)
Cash dividends paid to
stockholders (25,867) (13,439)
Proceeds from issuance of Common
Stock and other 2,059 1,766
Net cash used in
financing activities (89,446) (20,486)
Net decrease in cash and equivalents (69,419) (112,554)
Cash and equivalents at beginning of
period 341,825 218,031
Cash and equivalents at end of period $272,406 $105,477
Michaels Stores, Inc.
Summary of Operating Data
(Preliminary and Unaudited)
The following table sets forth the percentage relationship to net sales
of each line item of our unaudited consolidated statements of income:
Quarter Ended Nine Months Ended
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales and
occupancy expense 63.0 63.5 63.2 63.3
Gross profit 37.0 36.5 36.8 36.7
Selling, general, and
administrative expense 27.6 27.6 28.7 29.1
Store pre-opening costs 0.3 0.5 0.3 0.3
Operating income 9.1 8.4 7.8 7.3
Interest expense 0.6 0.6 0.7 0.7
Other (income) and
expense, net (0.1) 0.0 (0.1) (0.1)
Income before income
taxes 8.6 7.8 7.2 6.7
Provision for income
taxes 3.3 2.7 2.7 2.6
Net income 5.3 % 5.1 % 4.5 % 4.1 %
The following table sets forth certain of our unaudited operating data
(dollar amounts in thousands):
Quarter Ended Nine Months Ended
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
Michaels stores (A):
Retail stores open
at beginning of period 827 780 804 754
Retail stores opened
during the period 22 28 45 55
Retail stores opened
(relocations) during
the period 8 7 30 16
Retail stores closed
during the period --- --- --- (1)
Retail stores closed
(relocations) during
the period (8) (7) (30) (16)
Retail stores open
at end of period 849 808 849 808
Aaron Brothers stores:
Retail stores open at
beginning of period 160 157 158 148
Retail stores opened
during the period 4 1 7 10
Retail stores opened
(relocations) during
the period 1 --- 1 ---
Retail stores closed
during the period --- --- (1) ---
Retail stores closed
(relocations) during
the period (1) --- (1) ---
Retail stores open
at end of period 164 158 164 158
ReCollections stores:
Retail stores open at
beginning of period 5 1 2 ---
Retail stores opened
during the period 3 1 6 2
Retail stores open
at end of period 8 2 8 2
Star Wholesale stores (A):
Wholesale stores open
at beginning of period 3 2 3 2
Wholesale stores opened
during the period --- 1 --- 1
Wholesale stores open
at end of period 3 3 3 3
Total store count at
end of period 1,024 971 1,024 971
Other operating data:
Average inventory per
Michaels store $1,213 $1,313 $1,213 $1,313
Comparable store
sales increase 1% 2% 4% 2%
(A) Opening store counts reflect a reclassification of our Los Angeles
combination wholesale-retail store from a Michaels store to a Star
Wholesale store. Beginning in fiscal 2004, our Los Angeles
wholesale-retail store will be managed as part of our Star Wholesale
concept.
SOURCE Michaels Stores, Inc.
 back to top
Related links:
http://www.michaels.com
Company News On-Call:
http://www.prnewswire.com/comp/115769.html
Photo Notes:
NewsCom:
http://www.newscom.com/cgi-bin/prnh/20040804/DAMICHAELSLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Jeffery N. Boyer, Executive Vice
President-Chief Financial Officer, +1-972-409-1581, or
Christopher J. Holland, Vice President-Finance, +1-972-409-1667,
both of Michaels Stores, Inc.
|
