Apollo's Michaels seizes bankrupt rivals' market share
Apollo-owned Michaels is absorbing the customer bases of liquidated competitors Party City and Joann to break a decade of revenue stagnation, leveraging private equity agility to outmaneuver public peers.
Michaels Stores has rapidly expanded into party supplies and fabrics to absorb the market share left by the liquidation of Party City and Joann Fabrics. Moving at what CEO David Boone calls "rapid speed," the retailer built out dedicated party sections across its 1,400 locations, installed balloon-filling equipment, and established a new helium supply chain.
Simultaneously, it purchased Joann’s intellectual property and store brands at bankruptcy auction to introduce fabric into 1,000 locations. Both failed competitors generated roughly $2 billion in annual revenue, presenting Michaels with a significant growth avenue outside its maturing core market.
The aggressive physical expansion marks a strategic pivot under Apollo Global Management, which acquired Michaels for $5 billion in 2021. Former CEO Ashley Buchanan had previously prioritized e-commerce and assortment streamlining. "We spent a lot of time building out a lot of great digital infrastructure, but clearly not enough on stores and the store experience and that’s where we’ve shifted all of our capital in the past 12 months," Boone said.
This capital deployment includes regionalized inventory, such as bachelorette decorations in Nashville and rodeo-themed merchandise in Calgary. The strategy is designed to capture market share from rivals known for poorly maintained stores, positioning Michaels as a broader "celebrations" retailer.
The maneuvering appears to be yielding financial results. After a decade of stagnation with annual revenue stuck near $5 billion, Bloomberg reported that Michaels saw first-quarter sales and adjusted earnings grow by double-digit percentages. The chain had repeatedly failed to close a roughly $1 billion revenue gap with its larger private rival, Hobby Lobby.
Boone, who previously led Staples Canada, attributes the operational agility to Apollo's private ownership. "If you want to do things, your board is just a phone call away," he said. "You can make decisions much quicker and do things that are more profound and maybe not as easily explainable to the public markets."
The company is now five years into Apollo's ownership, approaching the typical seven-year private equity exit cycle. While an initial public offering is a logical next step, Boone deflected the speculation. "Apollo has owned Michaels for a while and will likely want to realize that investment at some point, but our main focus is on delivering the best experience for our customers," he said. "I always tell people that the customer has no clue who owns the company and doesn’t care."
