Michaels Need A Miracle

The Michaels Companies, Inc. owns and operates arts and crafts specialty retail stores for Makers and do-it-yourself home decorators in North America. It operates Michaels stores, Aaron Brothers stores and Pat Catan’s stores.

Going into their quarterly earnings tomorrow, I noticed bearish unusual call options.  The Smart Money bought over 2,500 Apr $10 strike call options.

Despite Michaels expecting to deliver a year-over-year increase in earnings on lower revenues and delivering positive earnings surprise in three of the last four quarters, the stock price is down almost 50% in the last three years.

This could be the reason why the company announced at the beginning of March that the current CEO, Chuck Rubin will be transition of his CEO role.

From my standpoint, Michaels is in a no win situation.  Because of Amazon, if they don’t move to having a stronger online presence they are doomed.  So Michaels has committed to integrating e-commerce and their in-store operations to create that much needed customer omni-channel experience and already have a couple of wins, like “Buy Online Pick-up In Store (BOPIS).”  However, this requires capital and has put a strain on their gross margins…in an already razor thin margin business. The situation looks like another company about to get Amazoned.

The chart suggests further downside for Michaels unless they can work a miracle.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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