Michaels IPO Moves Closer to Fruition

Michaels thumbnailMichaels Stores, in a filing with the SEC today, moved a major step closer to completing its long-awaited IPO.

In the amendment to its new IPO registration that was filed in December 2013, the company revealed two major new components of its IPO plans. The amended Michaels IPO filing indicates that the NASDAQ will be the market for the Michaels stock issue, and that the company has been issued code MIK by the exchange. No date or initial offering price has been set for the IPO.

The company is planning an IPO of approximately $500 million in common stock.  This will allow current private equity owners Bain Capital and Blackstone Group to cash out of their investment in the company, which they’ve held since 2006. The equity companies have been trying to cash out of their Michaels investment with an IPO since March 2012; however, their IPO plans have been repeatedly set back by a series of problems for the company. Michaels was once again beset by woes in 2014 when it was confirmed that the company was the victim of a sophisticated cyber attack that breached the security of credit card data. The company has made some positive strides, however – most recently with the launching of their online store.

On Tuesday, April 29th, Michaels Stores announced their financial results for Fiscal 2013, which ended February 1st. The company reported net sales up 3.7% over fiscal 2012, and gross profit up 3.2%.

Interesting notes from the SEC filing:

During the third quarter of fiscal 2013, we introduced, and are the exclusive big-box retailer of, the Rainbow Loom. In an effort to drive sales of the Rainbow Loom, we dedicated significant advertising and marketing efforts to this on-trend children’s craft product. Sales of the Rainbow Loom and replacement rubber bands contributed 2.9% to our comparable stores sales increase for fiscal 2013.

Our recent results of operations have been significantly enhanced by sales of one product, the Rainbow Loom. Sales of the Rainbow Loom and replacement rubber bands were the primary driver of the increase in our Net sales in the fiscal year ended February 1, 2014 compared to the prior fiscal year. Based on our retail experience, we expect that the popularity of this product will diminish over time, and our results of operations could be affected by our inability to anticipate demand for this product and stock the appropriate level of inventory. Similarly, if we identify products in the future that have a significant effect on our results of operations, we could face similar challenges and risks that could affect our profitability

In fiscal 2014, we plan to open 40 to 45 new Michaels stores, including 10 to 15 relocations. We expect these and future openings will be funded by our strong operating cash flow.

We plan to increase the penetration of our exclusive products, largely through private brands, and believe additional opportunities exist to expand our global sourcing and product design capabilities. We believe this will allow us to improve our selection and introduce new products tailored to our customers’ tastes, while more effectively controlling costs and expanding our margins.

4 Responses to Michaels IPO Moves Closer to Fruition

  1. janscholl May 2, 2014 at 1:08 am #

    I am a long time knowledgeable investor and previous owner of a large block of Michaels stock before it was purchased and taken private. I KNOW what Bain and Blackstone do to anything they buy. They suck the life out of the businesses and leave them heavily in debt. The Michaels I knew pre privatization and the one now are not the same company. I would not spend a penny on this company as an investment. They are relying on one or two “trending” items and are at the mercy of the preteen jumping on and off a bandwagon. The quality and selections they now carry are mediocre at best as they shed big name company lines and went with horrible cheap Chinese junk. The two local Michael stores were made to fire all management upon the sale to private equity and really stupid people were brought in. The two stores are very thin on customers on a regular basis. I have not been there since before the holidays. When the news of this SECOND major credit card breech came out, I said no more after also being thru the Target fiasco. Seems I am constantly changing my credit card numbers for situations like these. Michaels used to be an every Wednesday delight for me. Not anymore. My advice—put your money elsewhere with a decent dividend stock.

  2. mdlaslo May 2, 2014 at 12:35 pm #

    So agree janschool – Bain & Blackstone = pump (up the debts) & dump. I hope the lose money on the IPO, but they likely won’t. As masters of the universe and billionaires, they ensure they come out on top by buying the judges & rigging the games in their favor.

  3. Julie Ann Obryant May 2, 2014 at 1:35 pm #

    Maybe you should take some of that strong operating cash flow and invest in you employees!! As a frequent shopper I see disheartened, frustrated employees. That can never be good for sales. Over the past year I have noticed younger and newer employees that don’t care about the business like the faithful group that have left. You get what you pay for,and think my business will start being at another craft store. I have even stopped and prayed with some frustrated employees. I miss them! Now all I see is a different face every time I go. Uncaring employees will bring the business down until the doors close!! Take heart!!

  4. Beverly Gray May 3, 2014 at 6:34 pm #

    The sooner Bain is out of there the better.

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