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Why The Michaels Companies Inc.'s Stock Fell 15% Today

By Anders Bylund – Aug 30, 2018 at 5:15PM

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The crafting supplies retailer published a mixed second-quarter report this morning, which fell short of management's same-store sales targets.

What happened

Shares of The Michaels Companies (MIK) closed 14.8% lower Thursday, following the arts and crafts supplies retailer's second-quarter earnings release. Earlier in the day, the stock slipped as much as 17.2% lower.

So what

Net sales slipped 1.8% lower, compared to the year-ago period, landing at $1.05 billion. The analyst consensus had called for a slightly higher total of $1.06 billion. On the bottom line, adjusted earnings fell 21% lower, landing at $0.15 per diluted share. Here, your average analyst would have settled for $0.13 per share.

That's a mixed quarter at worst, but that's not the whole story. Michaels had guided to flat comparable store sales but reported a 0.4% decline instead. Retail industry investors often shrug off revenue and earnings surprises -- both positive and negative -- to pounce on this metric.

A person picking out colorful pieces of crafting material from a rack of shelves.

Image source: Getty Images.

Now what

Michaels' shares have now fallen 24% lower over the last 52 weeks as the retailer struggles to meet all of Wall Street's demands. The company is also going through a large store remodeling project that promises to boost long-term results but at the cost of speed bumps along the way.

All told, the stock is trading at just 7.8 times trailing earnings today. Investors with a stomach for long-term thinking and modest growth goals might want to take a second look at this ticker at these bargain-bin valuation levels.

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.

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