The Michaels Companies for the first quarter ended May 2, 2015. Net sales increased by 2.4%, or 3.6% on a constant currency basis, to $1.08 billion from $1.05 billion in Q1 2014.
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Comparable store sales increased by 0.3% or 1.4% on a constant currency basis. Comparable store sales increased 3.8% in the first quarter of fiscal 2014, which included approximately $30 million in sales of the Rainbow Loom product.
The first quarter of fiscal 2015 also saw less favorable weather than the previous year and the impact of a strong U.S. dollar exchange rate.
Gross profit increased 20 basis points to 41.0% of net sales compared to 40.8% of net sales in the first quarter of fiscal 2014.
The increase reflects leverage in occupancy costs from lapping the remodel activity in Boston last year, merchandise margin benefits from a lower mix of Rainbow Loom sales and increased private brand penetration, partially offset by promotional activity driven by cadence of the quarter.
Selling, general and administrative expense, including share-based compensation, related party and store pre-opening costs ("SG&A") as a percent of net sales increased slightly to 27.6% from 27.5% in the first quarter of last year.
SG&A was $298 million compared to $290 million in the first quarter of fiscal 2014 with the increase driven by higher costs associated with operating 33 additional stores and higher legal costs partially offset by a decline in related party expenses due to the termination of the management services agreement in connection with our Initial Public Offering (IPO) completed in July 2014.
Operating income grew 3.4% to $144 million from $139 million in the first quarter of fiscal 2014. As a percent of net sales, operating income grew 20 basis points to 13.4%.
Interest expense decreased to $38 million from $57 million in the first quarter of fiscal 2014 due to debt refinancing and the pay down of $619 million of the 7.50%/8.25% PIK Toggle Notes (PIK Notes) from proceeds of the IPO during the second quarter of fiscal 2014 and from cash flow from operations.
The effective tax rate was 37.0% for the first quarter of fiscal 2015 compared to 44.7% for the first quarter of fiscal 2014. The tax rate was lower due to a change in the status of our Canadian subsidiary in the prior year which resulted in the write off of certain deferred assets.
Net income increased 47.0% to $67 million in the first quarter of fiscal 2015 compared to $45 million in the same quarter last year. In the first quarter of fiscal 2015, diluted earnings per share increased to $0.32 from diluted earnings per share of $0.25 in the first quarter of fiscal 2014.
The Company opened ten new Michaels stores and closed one Michaels store and two Aaron Brothers stores during the first quarter of fiscal 2015, compared with opening eight Michaels stores and three Aaron Brothers closures in the first quarter of 2014.
At the end of the first quarter, the Company operated 1,177 Michaels stores and 118 Aaron Brothers stores. ■