“Is Michaels Going Out of Business?” – it’s a question that’s presently on the minds of craft enthusiasts and hobbyists who have turned to this retail giant for their creative needs for over four decades.
Michaels, a haven where creativity blooms and ideas come to life through arts and crafts, has recently encountered a series of predicaments that have led to the swirling whirlwind of uncertainty regarding its future.
The brand has recently been seen to close many of its stores while also being caught up in some lawsuits. In all of these, is Michaels going out of business? Or is this just a trying phase for the company and would pass? Just keep reading to discover the most recent update about Michaels Arts and Crafts.
Is Michaels Going Out of Business?
Let’s start out by answering this daring question. Many people are interested in knowing if Michaels is going out of business or if the company will still be around for a longer time to serve its customers. Well, the simple answer to the question is, no, Michaels is not going out of business.
Michaels, an iconic brand for artists and craft lovers for over 45 years, is witnessing some challenging times that have led to whisperings regarding its stability and continuity.
Closing several of its cherished stores, particularly the notable shutdown at Fresh Meadows, Queens, in January 2023, indeed raised eyebrows and spawned worries among patrons and employees alike. But is this the end for Michaels, or merely a strategic transition in its business model?
With over 1,200 stores stretching across the United States and Canada, Michaels has undeniably imprinted its mark in the arts and crafts retail industry. Financially, it’s been ups and downs for the company over the years.
For instance, it boasted a hefty $5.2 billion revenue in 2020 but also painted a rather dire image with a $97 million net loss in the same year’s second quarter, notably influenced by the effect of the pandemic. However, despite the recent challenges being faced by the company, it seems it will be around longer than many people would have thought.
There is no official statement yet confirming that the brand will soon be shutting its door. Instead, there have been some interesting moves showing the company is here to stay. We will talk more about this in the subsequent sections of this post. Just keep reading!
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What is Michaels Arts and Crafts, And What Does it Do?
Stepping into a Michaels store is more like entering a world where creativity knows no bounds. Offering a wide spectrum of art supplies, home decor, crafting materials, and seasonal products, the brand has been the go-to sanctuary for both seasoned artists and new hobbyists.
The company was founded in Dallas, Texas, in 1973. And over the years, it has dedicated its aisles to fueling the creative passions of its customers.
Despite the success stories, recent development at Michaels isn’t entirely bright and colorful. Store closures, financial woes owing to the pandemic, and surging competition from both physical and online rivals such as Hobby Lobby and Joann Fabrics have forced Michaels to rethink its strategies and face the daunting question: How to sustain in an ever-changing retail environment?
Recent years have seen Michaels take several strategic steps to keep its business afloat amid trying times. From curating a more robust online presence, reducing physical store hours, to renegotiating rent with landlords, Michaels has pivoted and twisted through the challenges posed by the pandemic and industry competition.
Why Is Michaels Closing Stores?
One of the major reasons behind the question, ‘Is Michaels going out of business?’ is the recent multiple closures experienced by the company. But why is Michael closing stores?
Well, a few factors are responsible for Michael’s decision to close some of its stores. One that particularly strikes the cord is the shift in consumer behavior, particularly the surge in online shopping, accelerated by the pandemic, which necessitated adaptations for businesses to sustain.
Apart from this, competition in the industry has also been on the rise. Many retail giants and e-commerce platforms in the space are not making things easy on smaller brands like Michaels, hence necessitating the need for strategic changes.
Declining sales, increasing operational costs, and an emphasized focus on bolstering their online platform are all factors that have compelled the company to shut the doors of several physical locations.
However, this does not mean the company is completely shutting down its operations. Instead, it is more like a strategic approach aimed at focusing and enhancing their online platform to align with the shifting shopping paradigms of consumers.
Is Michaels Going Out of Business: What Did the Company Have to Say?
Michaels, responding to the widespread speculations, assured its stakeholders with a firm ‘No’ to the looming question of its business continuity.
Through public statements, the company not only reaffirmed its commitment to providing quality arts and crafts products and services but also acknowledged the existent challenges and its strategic responses to navigate through them.
According to the management of the company, “In 2022, Michaels declared the shuttering of specific underperforming stores, a move to trim down operational costs and streamline its business to healthier financial shores. Despite the setbacks and speculations, Michaels portrays a resilient stance towards sustaining its place in the retail industry.”
What Company Bought Out Michaels?
In a significant shift in its corporate journey, Michaels was acquired by the private-equity firm Apollo Global Management in a deal that was worth a whopping $5 billion. This marked a vital transition for the company, and everyone expects it to carve out a sustainable path for the company amid the evolving retail landscape and financial challenges.
The merger agreement entailed Apollo launching a tender offer to acquire all outstanding shares of Michaels at $22.00 per share in cash, signaling a robust financial strategy aimed at sustaining the future ventures of the arts and crafts retailer.
Michaels Recent Legal Issues
Legal hurdles have also thrown in additional challenges for Michaels. A class action lawsuit was filed against the company in February 2023. Here, the company was accused of overcharging certain customers, notably in relation to sales tax, in what was described as “unfair and deceptive practices” by the plaintiffs.
In one instance, a customer claimed being charged at double the applicable sales tax rate for her purchase. Such legal predicaments have undoubtedly added an extra layer of complexity to Michaels’ ongoing business struggles and its journey toward financial and operational stability.
So, if you see people asking, ‘Is Michaels going out of business?’ you should know where they are coming from. All these are enough for even the most loyal customer to doubt the future of their favorite brand.
Final Note
So, is Michaels waving the white flag and bowing out of business? While there have been multiple store closures amidst some other challenges, the brand seems to be armed with enough strategy to weather the storm.
With this, Michaels Arts and Crafts may be around longer than most people think. The company is not going out of business – it is still very much around!
FAQs
What is the Michaels Controversy?
The Michaels controversy primarily revolves around a class-action lawsuit that was filed against the company. The lawsuit accuses the arts and crafts retail chain of overcharging certain customers, particularly in the state of Missouri, by allegedly applying a sales tax rate higher than the applicable use tax rate.
This issue sparked a wave of dissatisfaction among affected customers and brought Michaels into the limelight, not for its diverse arts and crafts offerings but for a potential breach in consumer trust through “unfair and deceptive practices.”
Is Michaels a Religious Company?
Michaels does not explicitly identify as a religious company. While it may support and provide resources to employees and customers of all faiths, it operates fundamentally as a retail business.
The company has stated that it strives to be a “welcoming, respectful, and nurturing community” that offers support to individuals of all faiths and those unaffiliated with a specific religion. It simply keeps its focus on providing arts and crafts materials and solutions to all without a specific religious alignment.
What Company Owns Michaels?
Michaels is presently owned by Apollo Global Management. In a deal that was finalized in April 2021, Apollo Global Management acquired The Michaels Companies, taking it private.
The agreement valued Michaels at $22 per share or a total deal value of $3.3 billion. The acquisition meant a strategic shift for Michaels, which had previously been publicly traded on the NASDAQ.
Who are Michaels Store’s Competitors?
Michaels faces competition from various retailers in the arts and crafts industry. Prominent direct competitors include Hobby Lobby and Joann Fabrics, which offer similar products and services to Michaels.
Hobby Lobby is known for its extensive range of arts and crafts supplies and home décor items, while Joann Fabrics, though specializing in fabrics and sewing supplies, also provides a variety of crafting materials.