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Here's Why Michaels (MIK) is Poised to Retain Momentum in 2021

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The Michaels Companies, Inc. MIK is one of the few stocks that have been resilient in the pandemic-ridden market, driven by its Maker Strategy, omnichannel growth and strong quarterly results. Notably, the company registered an earnings beat during third-quarter fiscal 2020. Moreover, both top and bottom lines improved year over year. Strength in the core arts and crafts business also contributed to quarterly growth.

Net sales grew 15.1% year over year, driven by comparable store sales growth and sales gain from additional stores opened since the end of third-quarter fiscal 2019. Going ahead, the initial sales trend in the fourth-quarter seems encouraging, with mid-single-digit growth. Also, robust demand in both stores and e-commerce aided quarterly results.

Speaking of e-commerce, the platform witnessed sales growth of more than 128% year over year in the fiscal third quarter on the back of omnichannel services, including curbside pick-up; same-day delivery; ship from store; buy online pick-up in store, or BOPIS; in-app purchases and more. Further, management remains focused on expanding omnichannel capabilities to capitalize on the current online boom. In fact, it introduced the BOPIS option to its online app. Topping it, the company’s new online express checkout option offers customers an even more convenient shopping experience in just four clicks.

Apart from these, the company is progressing well with its customer-centric, core 'Maker' strategy, which aims at strengthening its retail foundation, boosting omnichannel experience and repositioning the business. It opened its first Maker store in McKinney, TX, which offers a personalized assortment, better layout, improved services and a host of omnichannel capabilities. Going ahead, the company plans to open more such stores in fiscal 2020. It also revamped the Michaels rewards loyalty program and reinvented its store formats with a new in-store layout, inspiration hubs and an innovative checkout design under its core Maker strategy.

Further, it is on track to maximize marketing productivity through its media-mix model, wherein it will shift to higher productivity media options such as digital and addressable TV, without increasing the spending. Michaels also implemented a pricing and promotion strategy, which is likely to help optimize discounts and improve customers’ perception of the value it offers through discounts, coupons and other promotional activities.

Bottom Line

Although uncertainties prevail regarding the effects of the pandemic, we believe that the recent positive trends and strategies are likely to help keep Michaels’ stellar show on. Markedly, this Zacks Rank #1 (Strong Buy) stock has gained 44.1% year to date compared with the industry’s growth of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.


 

Moreover, the Zacks Consensus Estimate for earnings in fiscal 2020 and 2021 is pegged at $2.22 and $2.32, indicating a rise of 27.6% and 17.2%, in the past 30 days, respectively. Also, a VGM Score of A and a long-term earnings growth rate of 1.3% raise optimism on the stock.

3 Other Retail Stocks to Watch

DICK’S Sporting Goods DKS has a long-term earnings growth rate of 5.6% and currently, a Zacks Rank #1.

Hibbett Sports HIBB has an expected long-term earnings growth rate of 17% and presently, a Zacks Rank #1.

Five Below FIVE, with a Zacks Rank #2 (Buy), has an expected long-term earnings growth rate of 21%.

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