The Michaels Companies swings to loss in Q1 as Coronavirus shuts stores

The Michaels Companies (NASDAQ: MIK) released its quarterly financial results on Thursday that came in significantly weaker than expected. The company attributed its downbeat performance to the Coronavirus pandemic that pushes its stores into temporarily shutting down and weighed on demand in recent months. Michaels named Ashley Buchanan as its new CEO at the end of the last year.

Shares of the company tanked in premarket trading on Thursday but retreated after market open. At £3.87 per share, the Irving-headquartered company is roughly 45% down year to date in the stock market after recovering from £1.16 per share in March. In comparison, the benchmark S&P 500 index has seen a 3% decline in 2020 so far. Learn more about why prices rise and fall in the stock market.

Michaels reports its net loss at £50.40 million in Q1

The largest provider of wall décor, arts, and crafts in North America recorded its net loss in the first quarter at £50.40 million that translates to 34.1 pence per share. In the same quarter last year, the company had reported £29.92 million income or 19.05 pence per share. Michaels laid off 146 workers in Strongsville in May.

In the recently ended quarter, Michaels made 34.1 pence of adjusted earnings per share. According to FactSet, analysts had anticipated the company to earn 11.11 pence per share in the first quarter. In terms of sales, the company registered £634.87 million in Q1 versus the year-ago figure of £870 million. Experts, on the other hand, had forecast its sales to drop only slightly to £820 million in the first quarter.

In its report on Thursday, Michaels also said that it saw a 27.6% decline in its same-store sales in Q1 as compared to the analysts’ expectation of a much smaller 7.4% decline only in the recent quarter. The company posted its operating income at £48.14 million versus £73.52 million last year.

Michaels concludes Q1 with £735.59 million in cash

The 47-year old company boasted to have concluded Q1 with £735.59 million in cash after withdrawing from its revolving credit line. The Michaels Companies remarked in a statement on Thursday:

“The company expects to have sufficient liquidity to fund planned capital expenditures, working capital requirements, debt service requirements and anticipated growth for the foreseeable future.”

Michaels’ struggles in the stock market, however, started even before the outbreak. Its also performed downbeat in 2019 with an annual decline of about 40%. At the time of writing, the U.S. company has a market cap of £567.12 million and a price to earnings ratio of 2.73.