Q2 2020 Michaels Companies Inc Earnings Call
This time, we'd like to welcome everyone to the Michaels company's second quarter 2020, <unk> earnings Conference call.
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Please note this event is being recorded.
Thank you and now I'd like to turn the call over to your host Jim Matthias Director of Investor Relations Mr. Matthias you may begin the conference.
[music].
For fiscal 2022nd quarter financial results Conference call.
Presenting on this morning's call our CEO actually Buchanan, Jennifer Robinson, our SVP finance and Treasury.
Also in the room with US today is Mcdonald, our Chief Financial Officer, Jim Sullivan, our SVP and Chief Accounting Officer.
No for today's call the supplemental slide deck available on our Investor Relations website contains additional financial content to support today's discussion.
Well, we began our discussion I remind you that the comments made on this call.
All information provided on our website may constitute forward looking statements.
Made pursuant to an within the meaning of Safe Harbor provisions on the private Securities Litigation Reform Act of 1995 as amended.
These forward looking statements involve risks and uncertainties that could cause actual results to differ materially not anticipated by these statements.
Information about these risks as noted in our earnings press release and the risk factors in our latest annual report on form 10-K filed with the FCC.
As well and our other resi see filings.
These forward looking statements are only as of today. There are 2020 and the company assumes no obligation to update these statements except as required by law.
Investors are cautioned.
Not to place undue reliance on these forward looking statements.
Also please note that will reference non-GAAP financial measures on today's call. A reconciliation of these measures to the corresponding GAAP measures are detailed in today's earnings release follow supplemental slides.
I'd now turn the call it to our CEO Ashley.
Thank you for joining us this morning.
We delivered strong second quarter results are effectively positioning Michael for the future.
First porphyry opened during the quarter, we saw an immediate and sustained recovery in demand that largely kept pace with what we initially seem to me.
Our entire store races, and opened since the beginning of July.
I will discuss in a moment well continue to prioritize the safety of our team members and our customers and their return to sharpen our physical locations.
We're extremely pleased by the demand that sell transit our stores.
And with how well our team members executed.
I want to extend my gratitude to our entire team that's our makers for their ongoing commitment and support this unprecedented environment.
I also want to take a moment welcome Mike Diamond our CFO joining us officially just a few days ago.
Oh for to working closely with market believes his experience we valuable in supporting our ongoing efforts to position Michaels for long term success.
Is there in the room with us today.
Well introduce himself late in the call.
Sure. Many of you will have an opportunity to speak of Mike I get to know him over the coming month.
Back to our result.
We believe they couldn't I think it's running strong tailwinds for our business, resulting from lifestyle changes such as more time at home.
And the need for creative outlets as well as the same broader macro trends impacting the rest of market.
Additionally, factors, including federal stimulus.
Difficult to predict the main or do some variability as we move forward.
Well start today by briefly providing an update on the three key focus areas that outlined last quarter.
First as I mentioned, we remain focused on the health and safety our team members and customers.
The protocols, we implemented across our stores earlier this year are still in place.
This includes social distancing increased cleaning and sanitation measures.
Well I think last yelled at checkout.
Mass requirements or more.
Creating a safer environment inside our stores our team members and customers can work and shop with confidence remain a key priority for our team.
Okay.
Solidified and improve our financial position.
Thanks, a lot stronger trajectory of our business on the second quarter.
We repay the remaining 300 million outstanding our revolving credit facility.
But this undrawn a fully available credit facility and a strong free cash flow of over 300 million generated during the second quarter.
We ended the period with 1.3 billion of liquidity.
I'm very pleased to report.
The strong cash generation, our total liquidity has increased by approximately 100 million since the beginning in the history here.
And third.
We will continue to expand and they're pretty about digital and omni channel capabilities to provide makers are more seamless shopping experience.
I guess agile approach to developing and deploying new capabilities quickly.
We were capturing cells.
Hi level customer satisfaction and building on our earlier progress.
During the second quarter.
Enhance curbside to provide an even smoother contact with a pick up experience.
We optimize our ship from store network.
We introduce product bundling for E commerce orders to meet customer purchasing easier.
Additionally, initial results from our internal testing.
Scan are encouraging.
We expect our contact list and store shopping experience powered by the Michael that.
Uhhuh differentiator for us as customers increasingly powerhouse convenience and safety.
And finally in August we launched Michaels pro other critical extension of our assortment.
This offering allows makers to purchase competitively priced bulk supplies.
Customer feedback has indicated to be an essential need.
This is part of our omni channel strategy to attract new makers and getting a larger share of wallet.
Overall, I'm very pleased with this quarter's progress in reducing friction points and the shopping experience.
Importantly, we have significant runway and we'll continue to reiterate and then are they coming quarters.
Okay.
Oh.
Pillars to underpin our maker strategy, which include.
One Street retail foundation.
Two modernizing the omni channel experience.
And three establishing our position as the expert for makers.
Importantly, as work on these pillars, we're prioritizing opportunity to expand our value proposition to better serve our maker customers.
We are listening to them.
Actually on their feedback.
The result, we are meeting more their expectations.
First with regard to our foundation.
We are improving execution across our retail business.
Goal here is very simple.
Rather right product at the right price, where and how the customers expected.
And these efforts we began to optimize the flow of merchandise from truck to shelf to ensure inventory availability 11 out of stocks.
To enhance our in store shopping experience, we're improving our visual merchandising product placement and sightlines.
Our customers all <unk> also want to engage with team members.
Simplifying and store cast increased efficiency, our team members and free up labor hours that we can be redeployed to more customer facing activities.
In addition to this foundational retail work.
I had opened or acquired AC more stores as Michael stores in 2021.
And capitalize on resulting sales transfer opportunity.
Hand in hand within for your retail execution.
We are rapidly modernizing involving our omni channel capabilities to provide an increasingly frictionless customer experience.
This evolution, that's happening far faster than expected.
And combined with strong demand across our 1200 70 physical locations is creating positive tangible results for our business.
And finally.
We're working to position Michaels and the expert bran far maker in order to deepen our customer relationships and foster long term value engagement.
Our recently introduced marketing campaign, maybe value featuring real makers and their creative works and then well received by our customers.
We're doing more provide ideas desperation instruction that encourage creativity and connect the making community to our brand.
A significant offering a virtual classes and other interactive content as an important element extending impact of our branding.
Well no travel this summer.
Absent of in person summer camps and other activities for children are customer spend increased amounts of time at home.
And look to Michael's were positive and inspiring outlets for self expression or simply just to fill up today.
We offered an online kids club can't creativity.
Between 21 day, they're free crafting for our mini makers.
Our online class content has been very well received.
We're increasing that content available offering up to 25 weekly classes in September.
Oh from only four in April.
Viewership for these classes is growing between parents and kids.
Only a four month timeframe, we record over 200000 sites for online classes.
To further foster and drive interest and a cohesive maker community. We're also continuing to increase our used to personalize emails.
Appreciate the 70% milestone in July for.
From only 20% up into 2019.
Additionally in early August.
<unk> launched our revamps Michaels rewards loyalty program.
Which is designed to create long term engagement with our program members help strengthen our relationship across the maker community.
We remain committed to looking for ways to enhance this program to better serve and engage with our members.
Still very early we're pleased with initial results.
Now I'll hand, the call over to Jennifer Robertson to review, our second quarter financial results in greater detail.
Thanks Ashley.
Continues to make great progress against our key initiatives, which enabled us to capture strong customer demand in the quarter.
Our second quarter results were impacted by several tailwinds, including impacts from government stimulus.
And the factor customers are spending more time at home.
Our second quarter revenue was negatively impacted by not having all our stores open until the beginning of July.
Well its broader macro uncertainty.
For these reasons forecasting remains difficult.
We are encouraged by our second quarter performance and now that the overall third quarter sales trends observed through today's call remain strong.
We will continue to monitor developments across our business closely as we move through the coming weeks and months.
Fourth quarter sales totaled $1.1 billion, an increase of 11% on a year over year basis.
Sure sales grew 12% year over year.
The 12% quarterly comp was driven by a combination of existing customers with higher basket size.
An increase in new customers.
And continued strength and ecommerce result.
Even as our stores reopened strong demand and improving traffic.
We are particularly encouraged by the new customer additions, which were more than 15% year over year.
And we are working to retain and engage with these new customers.
Moving down the income statement.
Costs related to cope with 19.
Million dollars and were primarily S. DNA related.
The majority driven by hazard pay and other employee safety related costs.
Gross profit for the quarter with 343 million.
Year over year decline was primarily due to the charges related to the closure of our wholesale business.
As well as a higher mix of ecommerce south and the impact of care.
We will begin to lap the tariff impacts in the second half of 2020.
Occupancy cost leverage as a result of higher south.
Well its benefits from our ongoing pricing in sourcing initiatives offset the decline.
Excluding the cost related to our wholesale.
Gross profit would have been approximately $388 million.
Representing a year over year increase at 21 million or 6%.
Brad further quarter totaled approximately 100 million.
As for the quarter with 25.2% of south and down slightly in absolute dollars year over year.
Thats DNA this quarter benefited from the actions, we have taken to rationalize spending across the company.
Operating income for the corner with 53 million.
Which was ahead of our expectation and driven by strong customer demand.
On adjusted basis, excluding the impact of our wholesale business.
Operating income was approximately $106 million.
Over 40% from 2019.
Moving to attack.
The increase in tax expense in the quarter, what's due primarily to a change in the estimated impact and the carriers Act.
Hey tax benefit associated with a tax income settlement in the second quarter at 29 team.
On an adjusted basis EPS in the quarter.
30 cents.
Almost 58% versus prior year.
Cash flow was strong in the quarter.
We generated positive free cash flow of $331 million and ended the quarter with approximately 1.3 billion in total liquidity.
Comprised of a cash balance of 650 million and full availability on our revolving bank facility.
We will continue to manage our cash and liquidity, while we invest in our omni channel capabilities to meet growing customer demand.
During the first half of the year, we significantly change the working capital profile of our business.
Unforeseen.
Having shorter cash conversion cycle in these results.
Please note that we will still see some volatility in our cash flow generation during the year.
Driven by the underlying seasonality of our business.
Importantly, with more liquidity now versus at the beginning of our fiscal year, we're very confident in our ability to invest for growth.
Satisfy all debt obligation.
And generate significant excess cash which gives us additional flexibility.
Well talk more about our plans here during our upcoming Investor day.
Finally from an inventory perspective, we feel good about our current position as we head into the back half of the year.
Now I'll turn the call back over to Ashley.
Thanks, Jennifer.
As we sit here today, a month into the third quarter.
I'm encouraged by our progress against the backdrop of backdrop of considerable uncertainty.
Our focus remains on executing against our maker strategy and gain market share as we attract and retain new customers and deepen our connection with existing customers through focus merchandising marketing and omni channel initiatives.
The significant drop it made in a short period of time demonstrate that we had the right strategic vision with the right talent and executional capabilities to deliver.
We will go into much greater detail on our strategic plans and progress in our virtual Investor day on September 24.
On behalf of Michaels executive team I want to invite you to join us as we discuss our addressable market.
Before strategy.
Your omni channel plans as well as merchandising priorities.
We will provide a longer term financial algorithm for Michael and discuss our capital allocation priorities.
There are also being opportunity for you to engage our management team during a lobster next question.
Please visit the Michaels Investor Relations website Free Register.
Before we move that you any portion of the call.
I wanted to take a moment of thanks, Jennifer Robinson, Jim Sullivan, and the whole finance team for doing a fantastic job during one of the very challenging time for the company.
Thanks for your leadership and hard work, we haven't missed a beat it made considerable progress over the last six months.
Now I'd like to talk about our new CFO, Mike Damen to briefly introduce himself Mike.
Thank you Ashley.
It's really a pleasure to be here. This morning, I'm very excited to be joining the Michaels team as the new CFO.
Looking forward to working with actually in the team to further expand on the company's success.
Accordingly, I look forward to meeting and getting to know many of you over the coming months.
I firmly believe that Michael is an exceptional company that is well positioned to win in a rapidly evolving specialty retail industry.
Can't wait to get started I look forward to seen everyone. A couple of weeks at our Investor day.
Yeah.
Thanks, Mike.
Great have you on board.
Peter Lisnic as of June a portion of the call.
We will now begin the question and answer session.
Just a question you May press Star then one on your Touchtone phone.
If you are using it speakerphone, please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
Please limit yourself to one question with one follow up question. If you have additional questions you may re enter the question Q.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Christopher Horvers JP Morgan. Please go ahead.
Good morning, everybody.
[music].
Got it.
Basis.
Good store.
Play out some of the quarter.
It looks like percentage or stores closed during the quarter and related to that you mentioned strong sales quarter to date.
Many are reporting that moderation.
That's cool can you talk about 18.
Our.
Turning to slide.
Sure.
Our comp improved throughout the quarter as the stores reopened we end up with a 12% overall, we began in June with roughly a 1000 stores open.
And we're fully open by the beginning of July and that 12% comp was inclusive of the 353% increase of E com.
We're not going provide a month to month.
So just like we did last time, but for the second quarter, our open stores, including E Commerce was north of 20%.
I'm.
To your question our quarter to date.
August demands remain very strong as we exited Q2.
Into Q3.
And the longer term I believe the foundation on structural changes, we made well continue to a better position Michaels as we go forward to gain share.
No you're back to school question.
No I school for US is mainly a in August of that.
And like I said, we're really pleased with the way Argus is.
Shaping up so far this is remains strong.
And we'll see but right now we're very pleased with the way. We ended Q2 in a way where we're going into Q3.
So.
Thoughts.
Okay, great out.
Okay.
Uh huh.
Second quarter.
Okay.
Okay.
Right.
[music].
Hi, good back you lap promotions.
If you post a positive comp in the back half.
Could you see bar.
Expanding into rate base this year over year.
So first will address the questions related to Q2 gross margin.
As a reminder, the gross margin in Q2 includes $45 million and costs associated with the closure of the wholesale business.
So after that we'd be at the 388 million.
From a rate perspective, we did see headwinds on rate related to the tariffs as weve indicated would be the case.
That.
Subsides significantly as we go into the back half a year and begin to lap that compared to the first half of the year.
Our focus will continue to be on maximizing gross margin dollars. So at the commerce is a larger percentage up our.
Ourselves, we do have dilution there that the company has definitely focused on maximizing dollars and we were profitable across all of our net adds in Q2.
Thank you.
Our next question comes from Seth Sigman of Credit Suisse. Please go ahead.
Hey, guys. Thanks for taking the question nice quarter I want to talk a little bit more about how you're planning to second quarter in this sort of uncertain environment. It sounds like things are healthy right. Now I think there was a comment that you feel good about your inventory position as you head into the second half the year. It does look like inventories down about 19%. So my question.
Is that by design is that an effort to clean up the inventory.
The buys it or you facing some limitations how are you planning for that and how should we be thinking about it.
Yes, good question.
We're down 19% and if you take out the decrease hotel business, which we exited this down 15.
A couple of things. So we do feel really good about our inventory position as we go into the back half of the year a couple reasons for that one a lot of our.
Silver is broad based across all the categories, but a lot of as our promotional business which has.
Shorter lead time, the second part is the mix shifts a bit and Q3 Q4 and seasonal.
We didnt really buy down our seasonal business in Q3 Q4.
Very much.
So and if we didnt use this demand.
Area to clean up a lot of the clearance as we got actually less promotional so mix or so it's a combination of we cleaned up some clarity decrease.
It was a portion of it.
A mixed shifts in shorter lead times. So we feel we feel good about our inventory positions going into the back half.
Okay, all right Thats helpful. And then a follow up question on E Commerce growth, it's interesting that accelerated in the second quarter, even as your stores open I'm curious did you see that elevated growth continue like you know the latter part of the quarter. One stores were fully opened up and running again and just any more color on the behavior that you're seeing the influence.
Rolling out curbside and ship from store and whether that's accounting for a big portion of the growth and how does that tie into profitability as well. Thank you.
Well and we were really pleased our retail business it was over 50%.
It was strong throughout the quarter, obviously, I mean, it in diesel or just slightly as all the stores reopened as you would expect as you've got 1200 70 stores Rebecca open.
Customers engaged with us and a lot of ways. This time, whether it was biologic of a store where that was curbside, which we made improvements on yeah. We did ship from store.
We also that same day delivery App, obviously had a lot more activity as we do as we expanded our ability to comp may commerce through the out so it's clear that our customers are interacting with us in multiple ways and where we're really pleased that because our goal has been the things since I started with just I want to meet the customer wherever they want me Matt.
And we're agnostic on with channel. They go through August that were profitable at all nodes.
But we want to meet or they want to that and we're very pleased with with the way that that business is trending.
Okay, great. Thanks very much.
Okay.
Our next question comes from Simeon Gutman of Morgan Stanley. Please go ahead.
Thanks, everyone. My first question to follow up on E Com and agenda gross margin pressure are you able to isolate the impact from that pressure in the in the second quarter and then how to think about it for the rest of the year.
So.
As a result.
So Matt and shipping cost is dilutive to our gross margin rate. However, as we've indicated it's definitely gross margin dollar positive for us.
The significant amount of sell its going to curbside BOPUS definitely offset.
Oh that deletion.
Along with the.
Incremental shipping notes that we opened up a ship from store during the quarter. So those things help mitigate that dilution of our ecommerce to gross margin.
To that little bit.
Our mix and the way, we sell and fulfill E com.
Between current side.
Same day delivery and biologic of a store obviously.
As a more profitable no then the direct to home business, but and even with the direct to home business, we are making significant progress our cost reducing splits.
The type of product youre in the margin structure or selling through that do that channel. So we feel we're making progress across all the fulfillment channels and knows that we're using and our E com business.
One other item to note in Q2 that was a bit of a headwind as tariffs as Jennifer mentioned earlier and that headwind will subside as we get into the back half of the year.
And then I guess at will at Investor Day will will you quantify the E com mix, and then how BOPUS or curbside.
Maxes out with inside of that and then.
My follow up question unrelated.
You went back to high low pricing I don't know how.
Let the representative that could be during the last quarter to the extent consumers were more price taking.
And then you know, bringing coupons, but can you talk about the pricing strategy and did you see the percentage of customers lets say shopping on coupon decline and how that's trending as you know stores reopened.
Well I guess to address the for the first part which was well we've always been Highland reseller, we never went to SDLP that anytime.
Pre cobot or drink over there or whatever you want color out right now in the middle of it.
We were less promotional.
During the quarter by design.
And I talked about that last quarter, which is where you wanted to go from a pro branding perspective to provide more inspiration more creativity with discount versus just the discounting brand.
Our customers respond to that greatly with a constant we put out and the inspiration we granted to our marketing. So we were less rational.
During that timeframe, what the future holes were not giving you for your forecast.
Theres theres too much variability in it.
But during Q2, we were less promotional.
And the mix of E. Com I guess that will that will be held to until investor day.
Yes.
I'll be breaking out.
The.
Great mix.
Even in Investor day piece.
Okay, Thanks, Ashley nice quarter.
Sure. Thank you.
Again, if you haven't question. Please press Star then one.
And our next question will come from Steve Forbes of Guggenheim. Please go ahead.
Good morning, Mrs actually Steve couples Gulf for Steve Forbes I'll, just start with given your strength and ecommerce.
Nick your fulfillment plans for the holiday this year to capacity issues there.
We don't foresee any capacity issues in Q4.
So we have multiple ways filling that product, particularly that 270 stores is using as many fulfillment centers along with our fulfillment E com fulfillment centers.
We have actually converted our regional distribution is there to ship E com as well, particularly on our micro Michael's pro.
Platform. So we don't see any capacity issues and the Q3 before.
Great. Thank you.
Our next question will come from Cristina Fernandez of Telsey Advisory Group. Please go ahead.
Hi, good morning, and congratulations good quarter.
I wanted to ask about it's you need we saw dollars down this quarter, what's the worst real all stores. We opened how does that look for the second half of the year de sustainable it should we see see any trend back higher year over year.
[music].
It's from that to your point from an M&A perspective, we did have favorability in the quarter due to the stores being closed so and with a significant increase in cell. So somewhat of an anomaly in Q2 that we expect.
To be back more normalized if you will in the back half of the year. In addition to that we do have headwind on SGN a.
Related to performance based comp.
Based compensation, which we had indicated the began the year would be a headwind for us in 2020, and we do expect to see that in the back half of the here as well.
Okay.
And then my follow up you were allowed to initiatives hearing on this I wanted to see the chair any more color around the rebound Michaels rewards program, where you're seeing there and any more color on the test market. They gord that's been in.
In place for a couple of months in on the Michael Pro initiative.
Customer are you targeting and maybe talk about any expectations what expectations you have to that Brian.
Sure.
We had a loyalty rewards program in the past so we enhanced it.
It didn't really provide I would say any actual rewards associated with it. So we do test in two markets.
Last year, we were pleased with the results. So we rolled out the has been loyalty program.
And we do that the timing who were able to probably engaged with them in a better way so.
When we rolled out the loyalty program enhanced version this time, we're able to communicate with them more effectively with personalized emails.
With our may value marketing campaign with the content that we're rolling out for for that customer and along with a digital capabilities. We rolled out we felt that will the time to roll out the loyalty program and we're very pleased with initial on initial response.
And then your second question was on Michael's probe.
It's clear to us that there's a subset of customers that.
I want to buy bulk product from us as they have either aside business or side hobby business or is a full stop is for them. They wanted.
Really competitive pricing on both product and we view that as necessary extension to our offering for that customer.
You told us about what they want it and we delivered and we'll probably go into a much greater detail. We will go in a much greater detail during our investor day around that initiative.
Our next question will come from Carla Casella of JP Morgan. Please go ahead.
Hi, My first question to on dairy and can you give us a central how much.
That contributes to number it's a year ago numbers on either revenue gross profit our EBITDA.
Okay.
So so during.
Generally.
Didn't contribute a whole lot to the bottom line.
It was a very low margin business, which is part of the reason why where we're getting out of it.
We try to make it work.
Just the business has gotten tougher and tougher which is why we decided to liquidate the business, but incrementally it didnt. It didnt it didn't generate much to the bottom line.
Okay, Great and then you've been buying third and fourth quarter inventory are there any disruptions related to cooperate in terms of just getting the inventory supply it much inventory there clean, but I guess im wondering how is it the products that you want at the margin you want if there's any cost or discussed.
Okay.
Well I said, we feel really good better inventory position.
We placed seasonal orders back roughly in March.
We didnt, we did not by that seasonal business down that much.
We haven't had any disruptions today that product is actually flowing in as schedule.
Well you have a large supplier base.
Globally. This very diverse so we feel we feel good about our ability to fulfill those orders.
During the seasonal copper and coming up.
Okay, great. Thank you.
Our next question comes from Kate Mcshane of Goldman Sachs. Please go ahead.
Hi, Thanks. Good morning, Thanks for taking my question I just had a quick real estate question in terms of how you might be thinking about Hum, we relocating stores just given the likely disruption that's coming from the part that like in real estate, that's opportunities that you see going.
Forward, especially as you think about.
Remodeling and merchandising or stores.
Well like I said I think in previous previous calls.
There's only a very small handful our stores that are cash flow negative.
And that hasn't actually changed to do the pandemic secondly, using our network as many fulfillment centers on our ship from store basis as just enhance that.
So we have really no change in our real estate strategy going forward for the foreseeable future.
The one impact the pandemic did have is we did aggressively and negotiate with our landlord and through Q2 were able to realize about $12 million.
And rent abatement in cash received or cash will receive.
That gets amortized over the term leases that's not a credit in Q2, it'll be spread out over a number of years, but we certainly have worked very hard to.
Get the best terms, we can in this environment.
Thank you.
Our next question comes from Laura Champine of Loop capital. Please go ahead.
Thanks for taking my question. This morning, it's on debt levels. So obviously repaid the revolver and liquidity isn't at all time high I think you called out, but where does debt pay down stand on your priority list for cash flows over the next few years.
We will address our capital allocation strategy on our.
Investor day on the 24th.
Well, we recognize our leverage is not all just like I said in previous calls and.
I look forward to laying that out.
Later September for you all.
Understood then then.
A second question.
So we've got the percent of stores that were open basically at the end of May and obviously in at the end of June but at the end of April what percent of Michael stores were opened just so we can get a sense of how rapid the bounce back was.
While it seems like a long time ago out I actually have to go back and get that number at this point.
Well I don't even remember what were the end of April.
At the end of April we were we're.
Pretty much of the at the trough for the pandemic. So honestly don't Barbara. Thank you is right at 900 stores that were closed.
Hi.
Got it thank you.
So we had we did have a bounce back obviously.
Coming out of the end of April roughly 900 slowly started opening of May that I've talked about June and July.
Remember, even even with the store closed stores closed at the at the peak or the closures.
A lot of our stores, we were doing business do curbside pickup in and BOPUS. So.
There was revenue being generated even from most of those closed stores.
Understood. Thank you.
Our next question comes from William Reuter of Bank of America. Please go ahead.
Good morning.
So it's obviously you guys did a lot of initiatives to drive traffic you've got the online classes for kids, you've got loyalty programs better personalized emails I guess when you talk to your vendors. How do you expect that the industry performed as a whole and do you think you took share I guess I'm just wondering how.
Your growth compared to industry growth.
Yes, it's a good question I think.
Yes, it's a it's a large industry, but it's really hard to tell where share is I mean, we're the only thing publicly traded arts and crafts retailer.
Well, what we do feel and believe based on the foundation, we put in place.
We believe with our digital capabilities are my pro our retail foundational work, we're doing within the stores.
That we've we've set the foundation for consistent growth over time, and our ability to to continue to gain share.
How much area, it's really difficult to fill up like I said is the industry at large industry, but share data is not that forthcoming.
Okay, and then just follow up to me historically or fourth quarter growth margins are higher than your third quarter ones, which I expect we'll probably continue however, given that shipping costs are probably going to be elevated during the fourth quarter should the spread between the two of those compressive, we're thinking about our model.
Yes, we're not giving any guidance for Q3 year Q4, obviously due to all of the uncertainty it's very difficult at this point in time tend to predict how the back half of the Euro plan.
Okay. Thank you very much.
Our last question will come from Elizabeth Suzuki of Bank of America. Please go ahead.
Great. Thanks, very much just from a merchandising standpoint, where what are your expectations for holiday. This year and do you think you need to perhaps the stores for an earlier start to the season and how could that impact the cadence of your sales, which is usually pretty heavily skewed to fourq you I know, you're not giving specific guidance, but just thinking about holiday specifically.
And how this year could be different probably in previous years.
Like I said, we're not we're not providing any guidance for Q3 or Q4.
I would say historically arts and crafts people tend to buy different times of the year based on where there are making something or decorating and gifting thing.
Our Q4 has already started to land.
Existing like so we're not providing guidance on Q3 or before how that mix may play out or how the shopping season they change.
And he is just as a follow up I mean are you seeing any.
An extension of the back to school season, or just more demand for categories like supplies an organization just given how many students are starting off their school year remote hybrid. So your parents are providing more of that back to school supplies that is that extending the back to school a period for you guys from August into September.
Well I'll accent, ending Q2, and starting Q3, it's been a broad based.
Demand across pretty much all our categories.
So it's been it's been a rob base purchasing cycle across pretty much every category that Michaels.
Getting back to school or any other category. So we feel very good about the end of Q2 and going into Q3.
Great. Thank you.
This concludes our question and answer session I would like to turn the conference back over to actually Buchanan for any closing remarks.
Thank you for.
During this morning, we really appreciate it and look forward to talk to you on our Investor day. Thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.