The Michaels Companies will close the struggling Pat Catan’s chain, which consists of 36 arts and crafts outlets in Ohio and surrounding states, by Feb. 3. Up to 12 of the stores will be rebranded and reopened under the Michaels banner in fiscal 2019.
Michaels acquired Lamrite West, which included the Pat Catan’s stores, a wholesale business and a Chinese office, in 2016. The arts and crafts retailer will retain the wholesale unit and the support and distribution centers in Strongsville, Ohio. The sourcing office in China, which has significantly expanded under Michaels’ ownership, also will remain operational.
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The store closures will enable Michaels to leverage a more consistent merchandising assortment and eliminate duplicative retail operating expenses, according to Chuck Rubin, Chairman and CEO of The Michaels Companies. The retailer will provide employment opportunities or transition support for all affected employees.
Fiscal 2018 net sales for Pat Catan’s are projected to be approximately $111 million, with no material impact on Michaels’ overall adjusted operating income, excluding the impact of any restructuring charges related to the Pat Catan’s store closures. The process is expected to incur a one-time cost between $44 and $48 million, and the one-time after-tax cash benefit of the changes will be in the range of $20 to $25 million in fiscal 2019.
Michaels saw a slight downturn in sales in the nine-week fiscal period ending January 5, 2019, resulting in a same-store sales decreased of 0.2%. Consumer shopping behavior was more volatile than expected in January, and the company expects its Q4 same-store sales to be closer to the low end of its –0.5% to 0.5% guidance range.
However, Michaels is working to reverse its fortunes despite the declines. The retailer recently deployed Salesforce Marketing Cloud to personalize content, promotions and offers across multiple touch points. Michaels also rebranded its e-Commerce children’s section as MichaelsKids.com to bolster sales, while expanding its in-store and online kids assortment with 600 new items.
