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Arts and crafts retailer Michaels bets on adult coloring books for
August 29, 2016 – 12:05 pm
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Michaels arts and crafts retailerMom wants a coloring book
Irving-based Michaels Cos. is betting that adult coloring books will be a big seller this holiday season. The retailer said Thursday it believes it has the largest in-store selection of adult coloring books with 175 titles.
Coloring books for adults is a “double hit, ” Michaels CEO Chuck Rubin said, and not quite the home run of Rainbow Loom lift that Michaels benefited from in 2014. And the books have a lower margin than other products, but still a good category, he said.

Idalia Farrajota, Michaels senior vice president merchandising, said in a recent interview that the company expects to sell almost two million adult coloring books in 2015. The books mean people will buy other supplies: colored pencils, gel pens, chalk pens, sharpeners. Some people are framing their finished works or preserving them in scrap books. The movement started in the U.K. and took off last year with books designed by illustrator Johanna Basford.
It’s kind of an anti-digital movement, Farrajota said. “I’m unplugging from my life for a few minutes and having some quiet time.” It also dovetails other passions people have, she said, like horses and cats.

Third quarter results
Rubin on Thursday described conditions as a “choppy consumer spending environment.”
In the fall quarter, custom framing was disappointing after the company tried some new lifestyle grouping of frames and new promotions. But customers didn’t like that, so the largest custom framer dialed back the new ideas.

Michaels adult coloring booksBest-selling products were fine arts supplies, seasonal products and paper crafting, Rubin said during a call with analysts this morning to review third-quarter results. For the holiday, Michaels has added national TV advertising. On e-commerce, Rubin still thinks arts and crafts will never be a huge category online because of the nature of the product and artists and crafters wanting to touch and feel and see product colors in person. But Michaels is adding new product to its website and is testing the sale of fabric and sewing machines online only.

Michaels, the largest U.S. arts and crafts chain, posted a profit of .8 million, or 37 cents a share, vs. a profit of $64.1 million, or 31 cents a share, a year ago. It lowered its interest expense.
Sales increased 3.4 percent to $1.17 billion and same store sales increased 1.5 percent. The strong dollar, particularly against the Canadian dollar, had a $20 million drag on sales, Rubin said. Canada represents about 10 percent of total sales.

Analysts surveyed by Thomson Reuters had forecast a profit of 36 cents a share on sales of $1.17 billion, up 4 percent from a year ago. Michaels ended the third quarter with $114.7 million in cash, $2.9 billion in debt and about $586.7 million in availability credit. The chain operates 1, 196 Michaels stores and 118 Aaron Brothers stores.

How is Michaels stock doing 18 months after its IPO?
As of Wednesday’s close of $21.91 a share, Michaels shares have fallen 11 percent since the beginning of the year. But it’s performing better than its first-day close of $17.02 a share on June 27, 2014.

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Source: bizbeatblog.dallasnews.com
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