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Here's Why Shares of Michaels Soared on Tuesday Morning

Lou Whiteman, The Motley Fool

What happened

Shares of arts and crafts retailer Michaels (NASDAQ: MIK) jumped 15% on Tuesday morning as investors decided to focus on better-than-expected quarterly results over guidance that was a bit lighter than anticipated.

So what

Michaels reported adjusted fiscal fourth-quarter earnings of $1.44 per share on revenue of $1.79 billion, beating expectations for $1.42 per share in earnings on sales of $1.78 billion. But the company also said it expects adjusted first-quarter earnings of between $0.28 and $0.33 per share, below the $0.40-per-share consensus, on same-store sales down in the low single-digit range.

Various artist paintbrushes on a table.

Image source: Getty Images.

For the full fiscal year, the company sees adjusted earnings per share of $2.34 to $2.46 on sales of $5.19 billion to $5.24 billion, shy of expectations for $2.48 per share in earnings on revenue of $5.26 billion.

Interim CEO Mark Cosby, who stepped in late last month after Chuck Rubin agreed to transition out of his role as CEO, said, "I am excited about the long-term opportunities we have to engage with makers of all experience levels and expand our leadership position within the arts and crafts retail industry."

Now what

Michaels, like many retailers, has had a rough go of it in recent years. Even after Tuesday's stock surge, it remains down 40% over the past year. In theory, the company's products are more hands-on and hopefully less vulnerable to attack from Amazon.com and other e-commerce sites, but a lack of a hot arts and crafts trend has weighed on the business. A disappointing acquisition has hurt as well.

The fourth-quarter results, at least for the time being, seem to have restored some of the optimism surrounding the company.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends The Michaels Companies. The Motley Fool has a disclosure policy.