IRVING, Texas-A sharp decrease in interest expense offset a tepid sales performance and reduced gross margin to bring a 53.8 percent gain in net income for Michaels Stores in its fiscal second quarter.
Net income in the quarter, which ended on Aug. 3, totaled $20 million for the craft and home products retailer. Interest expense was down 26.2 percent. Net sales increased 1.3 percent to $904 million, including a decline of 1.3 percent in same-store sales.
Looking at the top line, Michaels said home accents and yarn provided its strongest category sales performance in the quarter. However, total transactions fell 3.6 percent and deferred custom-framing revenue was down 0.4 percent, offsetting a 2.7 percent pickup in average ticket.
Gross margin dropped 72 basis points to finish the quarter at 37.3 percent. Selling, general and administrative expenses increased 2.4 percent in dollars and 29 basis points as a percentage of sales, to 28.5 percent.
Michaels closed the second quarter with a total of 1,241 stores, encompassing both Michaels and Aaron Brothers location. The company operated 45 net new stores during the quarter.