Credit Suisse Downgrades Michaels After Q1 Print

Shares of Michaels Companies Inc MIK hit a new 52-week low Thursday in reaction to its first-quarter results, which prompted Credit Suisse to move to the sidelines.

The Analyst

Credit Suisse's Seth Sigman downgraded Michaels from Outperform to Neutral with a price target lowered from $18 to $11.

The Thesis

Michaels' stock is unlikely to experience any more notable downside but multiple concerns stemming from the print can no longer justify a bullish stance on the stock, Sigman wrote in the note.

First, adjusting for lower than expected opex and benefits from lower interest, the company would have reported a first-quarter EPS that was at the low end of management's guided range of 28 cents to 33 cents instead of the reported 31 cents.

Second, the company reported a comparable store decline of 2.9 percent, which was short of the Street's estimate of negative 1.4 percent and at the low-end of management's low-single-digit guide.

Sigman said second-quarter comps guidance of negative 1.5 percent to flat is short of the consensus estimate of positive 1.0 percent, despite facing the easiest comparison of the year. The company could see an acceleration in the back half of the year from seasonal products, a new digital strategy and improved fulfillment of online orders.

Price Action

Shares of Michaels were trading lower by 1.1 percent at $8.09 Friday morning.

Related Links:

Michaels Companies Falls 12% On Q1 Earnings

Morgan Stanley Downgrades Michaels, Cites Lack Of Catalysts

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