Michaels' Profit Fueled by Store Brands

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August 30, 2011

Michaels Stores reported a profitable second quarter, thanks largely to an improved selection of high margin private label merchandise. The increase in sales and profit caps a streak of good fiscal quarters for the chain as it looks to expand in-store craft instruction and private label selection.

For the first half of the year, store brands were approximately 39 percent of the chain’s total merchandise mix, up from 27.5 percent last year. Michaels private brands include Recollections, Studio Decor, Bead Landing, Creatology, Ashland, Celebrate It, Art Minds, Artist's Loft, Craft Smart and Loops & Threads.

John Menzer, Michaels CEO believes there’s room to expand the chain’s private label assortment, noting it gives the company a competitive edge. Until recently, Michaels largely relied on seasonal merchandise but began adding in-store classes and expanding private label in the past year, initiatives that are paying off in the current fiscal year.

As he largest crafts retail chain in the U.S., Michaels reported a record profit of $10 million for the period ended April 30. Total sales for the quarter rose 3.1 percent to $857 million and same-store sales for the comparable 13-week period increased 1.8 percent. Notably, shoppers increased their average ticket by 2.6 percent even though the number of transactions declined by just under 1 percent for the period. Gross margin rose nearly a full percentage point to 38.3 percent, again thanks to store brand sales in addition to better pricing and promotion management.

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