Exhibit 99.1
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NEWS RELEASE | Jeffrey N. Boyer | |
FOR IMMEDIATE RELEASE | Executive Vice President - | |
Chief Financial Officer | ||
(972) 409-1581 | ||
Christopher J. Holland | ||
Vice President - Finance | ||
(972) 409-1667 |
Michaels Reports Record First Quarter Earnings
— Net Income Up 41% —
— EPS Climbs 40% to $.42 —
IRVING, Texas — May 26, 2004 — Michaels Stores, Inc. (NYSE: MIK) today reported record earnings for its first quarter ended May 1, 2004. Net income for the quarter was $29.3 million compared to net income of $20.8 million in the same period last year, a 41% increase. Diluted earnings per share for the quarter were $.42 compared to $.30 in the same period last year, a 40% increase. Total sales for the first quarter increased 11% to $725.9 million from $656.4 million for the same period last year. For the quarter, same-store sales were up 6% and operating margins, as a percent of sales, increased 120 basis points to 7.2%.
Michael Rouleau, President and Chief Executive Officer, said, “We are very pleased with our sales and earnings performance for the first quarter. Our better-than-expected same-store sales were driven, in part, by the implementation of our new perpetual inventory and automated replenishment systems which helped us maintain higher store-level in-stocks versus last year. We were also affected by a more favorable retail environment. During the first quarter, we continued the accelerated clearance markdown program we began in the third quarter of fiscal 2003, resulting in a slight reduction in our gross profit as a percent to sales compared to the first quarter last year. Importantly, solid cost controls in the quarter allowed us to fully leverage our strong sales growth and expand our operating margin to a record first quarter level.”
Rouleau continued, “We expect another year of record earnings for fiscal 2004. We now expect full year diluted earnings per share to increase 15% to 20% over last year’s $2.54. On a quarterly basis, diluted earnings per share are expected to increase 10% to 15% in the second quarter, 15% to 20% in the third quarter, and 10% to 15% in the fourth quarter. Same-store sales in each of the next three quarters and for the year are expected to increase 3% to 5%. Within the second quarter, we currently expect same-store sales to increase approximately 3% in May and 8% to 10% in June, but to decline 2% to 4% in July due to a shift in the timing of the Fourth of July and related changes in our promotional calendar.”
The Company also announced that between February 1, 2004, the start of the fiscal year, and May 11, 2004, it has repurchased approximately 500,800 shares of its common stock under its stock repurchase plans at an average price of $48.24 per share. As of May 26, 2004, under certain repurchase plans, the Company is authorized to repurchase approximately 2.4 million additional shares plus any shares that may be repurchased with proceeds from the exercise of options under its General Stock Option Plan.
A conference call will be held at 4:00 p.m. CT today to discuss first 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
972/409-1300
opportunity to access the call via the Internet at 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 www.michaels.com or by phone at 973-341-3080, PIN 4251247.
The Company plans to release its May 2004 sales results on Thursday, June 3, 2004 at 6:30 a.m. CT. Any interested party may view the Company’s press release at www.michaels.com.
Michaels Stores, Inc. is the world’s largest specialty retailer of arts, crafts, framing, floral, wall décor, and seasonal merchandise for the hobbyist and do-it-yourself home decorator. As of May 26, 2004, the Company owns and operates 819 Michaels stores in 48 states and Canada, 158 Aaron Brothers stores, located primarily on the West Coast, two ReCollections stores in the Dallas/Fort Worth Metroplex, and three wholesale operations.
Certain statements contained herein which are not historical facts are forward looking statements that involve risks and uncertainties, including, but not limited to, estimation risks, customer demand and trends in the arts and crafts industry, related inventory risks due to shifts in customer demand, the effect of economic conditions, the impact of competitors’ locations or pricing, the availability of acceptable locations for new stores, difficulties with respect to new information system technologies, supply constraints or difficulties, the results of financing efforts, the effectiveness of advertising strategies and other risks detailed in the Company’s Securities and Exchange Commission filings. The Company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available.
This press release is also available on the Michaels Stores, Inc. website (www.michaels.com).
— Tables Follow —
972/409-1300
Michaels Stores, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Quarter Ended | ||||||||
May 1, | May 3, | |||||||
2004 | 2003 | |||||||
Net sales | $ | 725,852 | $ | 656,388 | ||||
Cost of sales and occupancy expense | 465,628 | 420,548 | ||||||
Gross profit | 260,224 | 235,840 | ||||||
Selling, general, and administrative expense | 205,701 | 194,594 | ||||||
Store pre-opening costs | 2,483 | 1,753 | ||||||
Operating income | 52,040 | 39,493 | ||||||
Interest expense | 5,328 | 5,071 | ||||||
Other (income) and expense, net | (789 | ) | (856 | ) | ||||
Income before income taxes | 47,501 | 35,278 | ||||||
Provision for income taxes | 18,169 | 14,464 | ||||||
Net income | $ | 29,332 | $ | 20,814 | ||||
Earnings per common share: | ||||||||
Basic | $ | 0.43 | $ | 0.31 | ||||
Diluted | $ | 0.42 | $ | 0.30 | ||||
Dividends per common share | $ | 0.12 | $ | — | ||||
Michaels Stores, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
May 1, | January 31, | May 3, | ||||||||||
2004 | 2004 | 2003 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and equivalents | $ | 381,352 | $ | 341,825 | $ | 211,040 | ||||||
Merchandise inventories | 906,655 | 892,923 | 857,181 | |||||||||
Prepaid expenses and other | 40,031 | 29,198 | 21,574 | |||||||||
Deferred and prepaid income taxes | 20,990 | 19,426 | 20,348 | |||||||||
Total current assets | 1,349,028 | 1,283,372 | 1,110,143 | |||||||||
Property and equipment, at cost | 825,928 | 808,230 | 731,548 | |||||||||
Less accumulated depreciation | (434,257 | ) | (420,313 | ) | (368,995 | ) | ||||||
391,671 | 387,917 | 362,553 | ||||||||||
Goodwill | 115,839 | 115,839 | 115,839 | |||||||||
Other assets | 14,850 | 14,519 | 13,907 | |||||||||
130,689 | 130,358 | 129,746 | ||||||||||
Total assets | $ | 1,871,388 | $ | 1,801,647 | $ | 1,602,442 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 214,454 | $ | 172,708 | $ | 166,944 | ||||||
Accrued liabilities and other | 190,040 | 194,395 | 160,162 | |||||||||
Income taxes payable | — | 2,377 | 10,160 | |||||||||
Total current liabilities | 404,494 | 369,480 | 337,266 | |||||||||
9 1/4% Senior Notes due 2009 | 200,000 | 200,000 | 200,000 | |||||||||
Deferred income taxes | 28,241 | 28,241 | 21,513 | |||||||||
Other long-term liabilities | 38,184 | 36,628 | 31,498 | |||||||||
Total long-term liabilities | 266,425 | 264,869 | 253,011 | |||||||||
670,919 | 634,349 | 590,277 | ||||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Preferred Stock, $0.10 par value, 2,000,000 shares authorized; none issued | — | — | — | |||||||||
Common Stock, $0.10 par value, 150,000,000 shares authorized; shares issued and outstanding of 68,586,669 at May 1, 2004, 67,997,567 at January 31, 2004, and 66,566,841 at May 3, 2003 | 6,859 | 6,800 | 6,657 | |||||||||
Additional paid-in capital | 510,542 | 495,910 | 480,982 | |||||||||
Retained earnings | 681,477 | 660,365 | 523,479 | |||||||||
Accumulated other comprehensive income | 1,591 | 4,223 | 1,047 | |||||||||
Total stockholders’ equity | 1,200,469 | 1,167,298 | 1,012,165 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,871,388 | $ | 1,801,647 | $ | 1,602,442 | ||||||
Michaels Stores, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended | ||||||||
May 1, | May 3, | |||||||
2004 | 2003 | |||||||
Operating activities: | ||||||||
Net income | $ | 29,332 | $ | 20,814 | ||||
Adjustments: | ||||||||
Depreciation | 21,678 | 19,854 | ||||||
Amortization | 98 | 100 | ||||||
Other | 291 | 283 | ||||||
Changes in assets and liabilities: | ||||||||
Merchandise inventories | (13,732 | ) | (47,763 | ) | ||||
Prepaid expenses and other | (10,833 | ) | (2,935 | ) | ||||
Deferred income taxes and other | 919 | 297 | ||||||
Accounts payable | 41,746 | 72,180 | ||||||
Income taxes payable | 3,588 | (12,295 | ) | |||||
Accrued liabilities and other | (6,660 | ) | (19,517 | ) | ||||
Net change in assets and liabilities | 15,028 | (10,033 | ) | |||||
Net cash provided by operating activities | 66,427 | 31,018 | ||||||
Investing activities: | ||||||||
Additions to property and equipment | (25,834 | ) | (13,746 | ) | ||||
Net proceeds from sales of property and equipment | 9 | 5 | ||||||
Net cash used in investing activities | (25,825 | ) | (13,741 | ) | ||||
Financing activities: | ||||||||
Proceeds from stock options exercised | 14,236 | 1,257 | ||||||
Repurchase of Common Stock | (7,798 | ) | (25,968 | ) | ||||
Cash dividends paid to stockholders | (8,220 | ) | — | |||||
Proceeds from issuance of Common Stock and other | 707 | 443 | ||||||
Net cash used in financing activities | (1,075 | ) | (24,268 | ) | ||||
Net increase (decrease) in cash and equivalents | 39,527 | (6,991 | ) | |||||
Cash and equivalents at beginning of period | 341,825 | 218,031 | ||||||
Cash and equivalents at end of period | $ | 381,352 | $ | 211,040 | ||||
Michaels Stores, Inc.
Summary of Operating Data
(Unaudited)
Quarter Ended | ||||||||
May 1, | May 3, | |||||||
2004 | 2003 | |||||||
Michaels stores (A): | ||||||||
Retail stores open at beginning of period | 804 | 754 | ||||||
Retail stores opened | 14 | 18 | ||||||
Retail stores opened (relocations) | 12 | 5 | ||||||
Retail stores closed | — | (A | ) | |||||
Retail stores closed (relocations) | (12 | ) | (5 | ) | ||||
Retail stores open at end of period | 818 | 771 | ||||||
Aaron Brothers stores: | ||||||||
Retail stores open at beginning of period | 158 | 148 | ||||||
Retail stores opened | — | 5 | ||||||
Retail stores open at end of period | 158 | 153 | ||||||
ReCollections stores: | ||||||||
Retail stores open at beginning of period | 2 | — | ||||||
Retail stores opened | — | — | ||||||
Retail stores open at end of period | 2 | — | ||||||
Star Wholesale stores (A): | ||||||||
Wholesale stores open at beginning of period | 3 | 2 | ||||||
Wholesale stores opened | — | — | ||||||
Wholesale stores open at end of period | 3 | 2 | ||||||
Total store count at end of period | 981 | 926 | ||||||
Other operating data: | ||||||||
Average inventory per Michaels store (in thousands) | $ | 1,026 | $ | 1,059 | ||||
Comparable store sales increase | 6 | % | 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. |