Michaels Stores, which is a top crafts retailer, has been trying to pull off an IPO for the past two years. Although Michaels’ SEC filings do not currently reflect it, according to a report in Reuters, it looks like an offering will finally happen — perhaps in the next couple weeks. With the overall equities markets bullish, the environment is certainly ideal for a Michaels IPO.
Founded in 1973, the company now has 1,145 Michaels locations as well as 118 Aaron Brothers stores. Each has about 36,000 stock-keeping units (“SKUs”) in arts, crafts, scrapbooking, floral, framing, home décor and seasonal offerings. This scale will certainly be a big attraction for investors looking at the Michaels IPO.
Yet there are some important differentiators, which help to set the company apart from competitors. For example, Michaels has a vertically-integrated custom framing business, which is a big driver for customer traffic. There are also private branded products (accounting for 48% of total net sales) that provide for higher-margins (some examples include Recollections, Artist’s Loft and Loops & Threads).
Michaels Social Media & E-commerce Success
And yes, the company has invested heavily in its e-commerce, social media and mobile platforms. In the past 12 months, michaels.com attracted 188 million visits. There are also 1.8 million Facebook (FB) followers and 395,000 Pinterest followers.
Investors in the Michaels IPO will also be encouraged by the company’s steady financial performance. In the first quarter of fiscal 2014, net sales rose by 5.9% to $1.05 billion, and comparable store sales grew by 3.8%. Cash flows have also remained substantial. From fiscal 2009 to fiscal 2013, the company generated about $2 billion in net cash from operations.
To help pump things up, the company has been adding more stores. For the year, it built 56 new Michaels and Aaron Brothers. At the same time, Michaels has benefited from a line of products known as Rainbow Loom, which is focused on the children’s crafts market.
There have also been smart efforts to improve the in-store experience. To this end, Michaels has a craft education program that provides comprehensive courses. From fiscal 2009 to 2013, participation went from 257,000 to 799,000 customers.
Michaels is no stranger to the IPO market. The company was once public until 2006, when it agreed to a $6 billion buyout from the Blackstone Group (BX) and Bain Capital.
So, why has the Michaels IPO process taken so long? Well, part of the reason was the overall volatility in the markets. But then, about a year ago, the former CEO John Menzer resigned because of a stroke. During this period, there was also a security breach, which affected about 400,000 cards.
As of now, Michaels’ leader is Carl Rubin, who has a standout background. Before joining the company, he was the CEO of ULTA Salon, Cosmetics & Fragrance (ULTA). He also held executive positions at companies like Office Depot (ODP) and Accenture. That experience should help him lead Michaels through a strong IPO.
There is currently no pricing information available on the Michaels IPO. But the deal should not have any problems getting done. Michaels is the dominant player in its category, with solid financials and a top-notch management team. So expect good things from the Michaels IPO.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.