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Michaels' (MIK) Partnership With UPS to Boost Stores Footfall

Zacks Equity Research

The Michaels Companies, Inc. MIK is focused on integrating its e-commerce and in-store operations to enhance customer shopping experience. Recently, the company announced a collaboration under which it rolled out United Parcel Service, Inc. UPS Access Point locations into more than 1,100 of its outlets. This is likely to make shipping or receiving UPS packages easy for customers. At the same time, this tie-up should drive footfall at Michaels stores as the UPS Access Point locations are likely to provide increased convenience to shoppers while picking their craft and decoration needs.

Following this latest rollout, shoppers can now ship UPS packages directly to Michaels’ outlet and drop pre-labeled shipments. Additionally, customers can make easy returns to online retailers providing the UPS drop-off facility.

For further ease of customers looking to set delivery preferences to a particular nearby Michaels’ store, the UPS My Choice for home solution provides automatic rerouting of packages to the desired store location. This latest collaboration allows shoppers to regulate their e-commerce deliveries and returns at their convenient Michaels outlet, quickly and expediently.

We note that UPS is currently working with merchants to offer customers a selection of the nearest UPS Access Point location during their checkouts.

Meanwhile, Michaels’ e-commerce platform has been a significant contributor to the company’s sales growth. In second-quarter fiscal 2019, sales from e-commerce business remained sturdy backed by higher traffic and conversion rate.

Additionally, the company continues to gain from omni-channel capabilities like “Buy Online Pick Up in Store” (BOPIS), which is a cost-effective way of fulfilling online orders as it eliminates shipping costs. In the fiscal second quarter, BOPIS contributed nearly 44% to online sales and was about two-thirds of online orders.

Michaels also completed a major step in the evolution of its e-commerce business by exiting third-party fulfilment providers for online orders. It now has in place a new order management system supported by an in-house customer care team to manage all online transactions. All orders from Michaels.com are now fulfilled by Michaels stores or its own distribution center. This is likely to position the company well for further e-commerce sales growth in the future.

On store front, Michaels remains committed toward expansion and remodeling efforts to boost margins and profitability. This will also lead to higher comparable-store sales (comps), thus generating greater sales and capturing market share. In a bid to enhance services for its patrons, the company has been expanding its store base and introducing technological advancements. Within its 2019 priorities, Michaels is focused on expanding assortments in key growth-driving categories while de-emphasizing on slower moving categories.

As part of its first category expansion in all stores, Michaels doubled the space for assortments of tools and technology with recognized brands such as Cricut, Caesar and Oracle. These efforts are likely to help the company enhance its leadership in the DIY (do-it-yourself) category. Further, the company remains on track to expand its assortments in craft storage, jewelry and art categories. It expects these changes in assortments to boost sales in the second half of fiscal 2019.



Price Performance

Driven by the aforementioned efforts, shares of this leading arts and crafts specialty retailer have gained 13.7% in the past three months. Meanwhile, the industry has declined 14.3%. Currently, Michaels carries a Zacks Rank #2 (Buy).

2 Other Key Picks in the Same Space

Regis Corporation RGS has an expected long-term earnings growth rate of 7.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports, Inc. HIBB has an impressive long-term earnings growth rate of 10.9% and a Zacks Rank of 2.

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