plunged as much as 49% Wednesday after the arts and crafts retailer became the latest to report a sudden drop in sales.
Don't Be Like Mike
Michaels said "general economic conditions and uncertainties" have cut demand so much that same-store sales -- sales at stores open at least a year -- are likely to be flat during October and up just 1% to 2% for the entire fiscal third quarter, which ends in October. Earnings for the third quarter, meantime, will likely be 40 cents per share, not the 45 cents previously forecast by the company.
It gets worse: Fourth-quarter earnings will also be "negatively impacted" if sales trends continue, said CEO Michael Rouleau in a statement. Fourth-quarter same-store sales growth is likely to be in the 3% to 5% range, while annual earnings are likely to be $2.40 a share. Analysts surveyed by
First Call/Thomson Financial
had anticipated annual earnings of $2.58.
The falloff was sudden; on Oct. 5 the company reported a 4% increase in September same-store sales and made no mention of deteriorating demand.
Michaels' bad news echoes other recent warnings from the retail sector, including upscale home goods seller
, which said last week that slackening demand at both its retail stores and catalog operations will slash third-quarter earnings by as much as 77%. It, too, mentioned the slowing economy as a possible factor. (As
wrote earlier this week, the combination of market jitters, higher oil prices and tough comparisons with last year's fourth quarter mean the retailers may not see any kind of reversal until 2001.)
Michaels shares fell $15.44, or 44%, to $20 in midday trading after earlier dipping as low as $18.