Yet Again, Michaels Tries for an IPO

The crafts store already filed for an IPO once this year

   

Michaels Companies, a retailer for arts and crafts, attempted to pull off an IPO this year. But unfortunately, the plans were derailed because the company’s CEO had a heart attack. So in his place, Michaels brought in a new leader, Chuck Rubin. All in all, he has been a good choice and of course, he has continued the plans for a public offering. In fact, Michaels recently refiled an S-1.

Michaels operates 1,259 stores (which include 122 Aaron Brothers ), making it the leader in its industry. Each location has 36,000 stock-keeping units that include framing, scrapbooking materials, arts supplies, floral and home décor. The company also has an aggressive strategy with social media on Twitter (TWTR) and Facebook (FB).

A key to the success of Michaels is its private-brand products, which provides the company with higher margins. In fact, about 49% of the total offerings are in this category. But Michaels has also leveraged its massive scale and strong brand to snag exclusives from third-party vendors.

For the most part, the financials have been steady. For the first nine months of 2013, net sales increased by 4.5% to $3 billion and comparable store sales increased by 2.1%. Although, during this period, net income increased by 16% to $110 million.

Back in 2006, Michaels agreed to a going-private transaction for $6 billion. The private equity sponsors included Bain Capital and the Blackstone Group (BX). Since then, they have taken swift actions to reduce the costs and boost cash flows.

As for the IPO, the financial terms have not been set. But the company has announced that the lead underwriters will include J.P. Morgan (JPM) and Goldman Sachs (GS).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/michaels-ipo/.

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