Arts and crafts retailer The Michaels Companies (NASDAQ:MIK) reported second-quarter results early Thursday morning. The company posted solid growth on both the top and bottom lines, and share prices jumped on the news.

Michaels' second-quarter results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$1.07 billion

$1.06 billion

1.2%

Net income

$35.6 million

$35.6 million

0%

GAAP earnings per share (diluted)

$0.19

$0.17

12%

Data source: The Michaels Companies.

What happened with Michaels this quarter?

  • Earnings landed at the top end of Michaels' official guidance for the second quarter. Comparable-store sales were expected to fall by approximately 1% year over year but actually increased by 0.6% instead.
  • The company opened five new Michaels locations during the second quarter and closed three Aaron Brothers stores. The store network now includes 1,366 stores in total.
  • Inventories rose 4.4% year over year to $1.2 billion. The increase accounts for a net addition of 10 stores, as well as preparations for merchandising plans in the second half of 2017.

Michaels provided the following guidance for the third quarter and full year of 2017:

  • In the third quarter, the company plans to open 10 new locations while closing four. Another five Michaels stores are being relocated.
  • Comparable store sales should increase by roughly 1.7%.
  • Earnings should land near $0.42 per share, up from $0.40 per share in the year-ago period.
  • Full-year sales are now seen rising by 3.3%, up from 2.9% in the guidance provided last quarter.
  • Bottom-line earnings are now seen stopping at $2.13 per share in fiscal year 2017, up from $1.88 in 2016. The previous guidance range was centered around $2.09 per share.

What management had to say

In a prepared statement, Michaels CEO Chuck Rubin noted that the so-called Vision 2020 plan is paying dividends ahead of schedule.

"Our efforts to create a more experiential, omnichannel shopping experience, improve our value perception, and leverage our customer analytics are gaining traction earlier than we initially expected," Rubin said. "We believe our sales and profitability trends will continue to improve, as we pursue our Vision 2020 strategy and as our customer continues to respond positively to the enhancements we are making to offer more value, more trend-right product, and a more integrated, omnichannel experience."

"Arts & Crafts" written in carved-out gold letters on a dark, textured block of wood.

Image source: Getty Images.

Looking ahead

The Vision 2020 program calls for a more data-driven approach to retail operations. It's all about listening to customer preferences and expectations, and then shaping the shopping experience to fit those expectations. If that sounds like Retailing 101, rest assured that many businesses fail to follow those seemingly obvious guidelines.

Online shopping is a key aspect of this long-term plan, though the hands-on nature of arts and crafts places a natural limit on how far the e-commerce idea can be taken. Michaels launched its online store just three years ago and still doesn't report actual numbers from that effort.

All in all, The company more than delivered on management's promises in the second quarter, and the outlook for the next couple of reports was bright. Meanwhile, share prices jumped more than 10% higher on this report, but Michaels stock still trades at a bargain-bin valuation of 11.5 times trailing earnings.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends The Michaels Companies. The Motley Fool has a disclosure policy.