Retail · Deep dive

Michaels

Apollo's arts-and-crafts LBO traded at 34 cents on the dollar in May 2025 and refinanced near par in February 2026 — a specialty retailer that survived the retail apocalypse mostly by outliving the people it was competing with.

at risk

The comeback is real but was handed to it — a tariff reprieve and the liquidations of Joann and Party City — while leverage stays high, the store base is fixed, and the one growth engine Michaels controls has to beat Etsy at its own game.

Snapshot

Michaels is North America’s largest arts-and-crafts retailer: over 1,300 stores across 49 US states and Canada, roughly $5B or more of annual sales, and an ownership structure that has defined it for twenty years. Apollo Global Management took it private in April 2021 at $22.00 a share — about $3.3B of equity value and roughly $5.0B of enterprise value. In May 2025, after the US briefly imposed tariffs of up to 125% on Chinese imports, Michaels’ 2029 bonds traded at 34 cents on the dollar, a price that normally means a restructuring is already being drafted. Instead, tariffs de-escalated, two of its biggest competitors liquidated, and by February 2026 the paper was near par and Michaels raised roughly $4.85B to rebuild its capital structure. It is one of the strangest survival stories in specialty retail — and the reasons are worth reading closely, because most of them were not Michaels’ doing.

Founding story

The origin is unglamorous and Texan. In 1973 Michael Dupey converted one of the Ben Franklin variety stores run by his father Jim’s Dupey Enterprises into an arts-and-crafts store in Dallas and put his own first name on it. The family grew it to eleven stores, then sold in 1983 to Peoples Restaurants, a vehicle controlled by the Dallas financiers Sam and Charles Wyly, who spun it out, took it public and turned a regional chain into a national big-box format. Dupey went on to start a competing chain, MJDesigns, which no longer exists.

Everything since has been financial engineering. In October 2006, Bain Capital and Blackstone bought Michaels for roughly $6.0B — one of the largest retail LBOs ever attempted, funded with a $2.4B term loan, a $1B ABL revolver and $1.4B of notes. They held it through the financial crisis and returned it to market in a June 2014 Nasdaq IPO at $17.00 a share, raising about $472M. The public chapter lasted seven years and ended badly: the stock closed at $15.00 on 26 February 2021, below its IPO price, before Apollo bid $22.00 — a 47% premium that flattered nobody.

The two people who matter now are David Boone, CEO since February 2025 after running Staples Canada and sixteen years at Loblaw, and chairman Andrew Jhawar, a 25-year Apollo veteran who built the firm’s consumer and retail practice before retiring as a partner in December 2024. Boone took the job roughly six weeks before the tariff shock nearly killed the company.

How it works

Physically, Michaels is a suburban strip-mall box stocked with tens of thousands of SKUs of low-ticket consumables — yarn, beads, paint, canvas, floral stems, framing moulding, seasonal décor — that customers rarely plan and mostly discover. The economics turn on three things.

First, the seasonal cycle. Craft retail is brutally back-half weighted: Halloween, Christmas and the December-January project surge do the work. Management guided to roughly $1.77B of revenue in Q4 alone, and Bloomberg reported inventory up about 20% ahead of the 2026 second half. Working capital is drawn down in spring and refilled in autumn, so any tariff or freight shock lands precisely when the buy is already committed.

Second, custom framing — the margin engine and the least-discussed part of the business. A customer brings in a print; an associate specs moulding, mat and glass; the order goes to Artistree, Michaels’ own framing manufacturer, producing in Texas and North Carolina. It is vertically integrated, made-to-order, non-comparable (nobody price-shops a custom mat), domestically manufactured and therefore largely tariff-immune. In late 2025 Michaels began rolling out 10-Minute Custom Framing at a $29 entry price, live in 500-plus stores and chainwide by February 2026, explicitly to turn framing from a considered purchase into an impulse one.

Third, sourcing. A large share of general merchandise is made in China. That is the fault line. When duties spiked to 125% in April 2025, the company held internal crisis calls over a potential liquidity squeeze and Apollo moved to speaking with management several times a day. Moody’s noted in February 2026 that Michaels has limited ability to pass price increases to an already stretched consumer — the polite way of saying tariff risk falls straight onto gross margin.

Product and business overview

Core store merchandise. Craft supplies, art materials, floral, seasonal and party goods. Post-Joann, Michaels added yarn, fabric and sewing machines — Boone hosted a call with nearly a hundred vendors within two months of Joann’s January 2025 bankruptcy, urging them to move assortment into Michaels rather than shop it around.

Custom framing / Artistree. Owned manufacturing, made-to-order, the highest-margin line in the company and the strategic asset in a tariff world.

Private label. Recollections, Artist’s Loft, Ashland. Estimates put private label near 28% of sales at roughly 40% gross margin against ~25% for national brands — the mix shift is a core Apollo lever.

Michaels Rewards. Relaunched 2 March 2026 with three tiers: Red (3% back), Gold (6% after $300 of annual spend), Platinum (9% after $1,000), plus everyday coupons of 20-25% off regular-priced items for the top tiers and an extra 10% off custom framing for cardholders. It launched in Canada for the first time in April 2026.

MakerPlace by Michaels. A handmade marketplace launched in 2023, aimed at Etsy. Basic sellers pay no listing fee, a 4% commission and a 3% + $0.20 transaction fee; the Professional plan is $9.98/month (or $110/year) and drops commission to 2%. Sellers earn 3-6% affiliate revenue on supplies referenced in how-to posts and keep 80% of class registration revenue. The take rate sits deliberately below Etsy’s ~6.5%.

Michaels Marketplace. A separate third-party marketplace on michaels.com for brands and distributors, extending assortment without inventory risk.

Business model and pricing

Revenue is booked as retail sales, custom framing services and a small marketplace take rate. But under Apollo the operating business is only half the model. The other half is the balance sheet.

The equity return is a deleveraging trade, not a growth trade. Funded debt has been reported above $3.7B with another ~$1.6B of lease obligations (S&P, early 2026). Every dollar of EBITDA expansion — private-label mix, framing attach, freight consolidation (Boone has been loading trucks fuller and running fewer trips as fuel costs rose with the Iran conflict) — both raises the exit base and pays down the stack. Moody’s, stable as of February 2026, expected leverage to improve to about 5.5x this year with positive free cash flow; S&P moved its outlook to positive while holding the rating at B-. That is the scoreboard.

The February 2026 refinancing is what makes an exit thinkable: roughly $4.85B raised, anchored by a $1.1B seven-year first-lien term loan led by UBS at around 98 cents and 475-500bp over benchmark. Bloomberg reported in July 2026 that the likely exit is an IPO, with no timeline set. Apollo is five years in. That clock is loud.

Traction over time

Headcount moved the other way: Revelio Labs put Michaels at 26,467 employees in December 2025, down 3.3% year on year and 7.5% from 2023. A retailer growing comps while shrinking headcount is either getting more productive or thinning its stores. Employee reviews suggest both.

Market analysis

The category is large and structurally durable rather than fast-growing. Estimates vary by scope — The Business Research Company puts the global arts-and-crafts market near $56B for 2026, with North America around 27.5% of revenue in 2025; IBISWorld sizes US online hobby-and-craft sales alone at $25.3B in 2026, compounding at a modest 2.1%. A US TAM of $40-45B across all channels is a reasonable working number. Mintel reported nearly three-quarters of US adults did at least one craft activity in the past year — the pandemic pulled them in and digital fatigue has kept them.

The structural change is not demand, it is supply. Two years ago the category had Michaels, Joann, Party City, Hobby Lobby and Amazon. It now has Michaels, Hobby Lobby and Amazon. That is the entire bull case, and it is a good one: fewer doors means less promotional intensity, better vendor terms, and pricing power Michaels has not had since the 2000s. The two exogenous variables are tariffs and the discretionary consumer. Michaels remains materially exposed to China per S&P, and the May 2025 reprieve was a policy decision, not a moat.

Competitive intel

Hobby Lobby is the problem: roughly $8B of estimated annual sales, 1,000-plus stores, family-owned and famously debt-free. No refinancing risk, no sponsor clock, structurally lower cost of capital — it can sit on price indefinitely. Michaels’ answer is assortment breadth, loyalty economics, and the fact that Hobby Lobby closes on Sundays.

Amazon takes the reorder: once a crafter knows the SKU, the browse advantage evaporates. Temu and Shein took the bottom of the market during the de minimis era and, while the 2025 closure of the exemption and resulting price rises blunted them, they trained a cohort of price-sensitive crafters to wait ten days for something 70% cheaper. Etsy is the wall MakerPlace has to climb: Michaels’ fees are cheaper, but fees have never been the binding constraint in a marketplace. Buyer liquidity is, and Etsy has it.

And the two names that most improved Michaels’ 2025-26 numbers — Joann and Party City — improved them by dying. An 8% comp that includes a competitor’s shuttered store three miles away is real cash, and a poor predictor of what happens once the transfer laps.

History and evolution

• 1973 — Michael Dupey converts a family Ben Franklin store in Dallas into the first Michaels.
• 1983 — Dupey Enterprises sells the 11-store chain to the Wyly brothers’ Peoples Restaurants; national expansion follows.
• October 2006 — Bain Capital and Blackstone take Michaels private for roughly $6.0B, one of the largest retail LBOs of the era.
• June 2014 — Nasdaq IPO at $17.00, raising ~$472M to retire debt.
• March-April 2021 — Apollo agrees to acquire Michaels at $22.00/share (~$3.3B equity, ~$5.0B EV); tender offer completes 15 April.
• 2023 — MakerPlace and Michaels Marketplace launch.
• January 2025 — Interim office of the CEO (Heather Bennett, Perry Pericleous, Stacey Shively) runs the company during the search; Joann files its second bankruptcy.
• February 2025 — David Boone named CEO.
• April-May 2025 — Tariffs on China peak at 125%; internal crisis calls; 2029 bonds hit 34 cents; mid-May de-escalation rescues the credit.
• 2025 — Michaels acquires Joann IP for reportedly under $10M; adds fabric, yarn, sewing and party goods.
• February 2026 — ~$4.85B refinancing; S&P outlook to positive at B-; bonds near par.
• March 2026 — Rewards program relaunched with a 9% Platinum tier; Canada launch follows in April.
• July 2026 — Bloomberg reports an IPO is the most likely Apollo exit, timeline unset.

What people say

The case for. Analysts have been unusually generous. Neil Saunders of GlobalData told Bloomberg (July 2026) that private ownership let Michaels act decisively while listed rivals ground through process, and that the analogue-hobby trend is squarely its sweet spot. The credit market agreed: bonds went from 34 cents to near par between May 2025 and February 2026, S&P moved to a positive outlook and Moody’s holds stable with leverage seen improving to ~5.5x. Customers who like Michaels like it for the reason the company hopes — variety you only find by walking the aisle. Glassdoor and Indeed reviewers consistently praise scheduling flexibility for students and the pleasure of working among creative people.

The complaints. Start with employees, because in a post-LBO retailer staff sentiment is a leading indicator. Michaels holds roughly 3.1 out of 5 on Glassdoor across ~9,600 reviews, with about 44% recommending it to a friend and compensation rated 2.5 out of 5 — low even for big-box retail. The themes are specific and consistent: chronically low scheduled hours combined with pressure to stay late, understaffing on the busiest days, too many tasks for too few people, huge store-to-store variance in management quality, and pressure to push rewards and credit-card sign-ups. That headcount fell 7.5% from 2023 to 2025 (Revelio Labs) while comps rose is not a coincidence; margin expansion in a store-labor business usually means someone is doing two jobs.

Customers are no kinder. On Trustpilot, BBB and PissedConsumer the dominant complaint cluster is custom framing — the very product Michaels is betting on — with reports of scratched or badly mounted work, wrong sizes, three-week turnarounds with no status communication, and unhelpful framing managers. Online orders arriving late, partially refunded or damaged without notice appear constantly. And the oldest gripe in craft retail persists: shoppers accuse Michaels of lifting list prices and then presenting the inflated number as a sale while narrowing coupon eligibility. The 2026 rewards relaunch reads as a direct response — and as confirmation that coupon-driven price perception had become a liability.

On the credit side, the analyst commentary is politer but the substance is the same. Moody’s flagged in February 2026 that leverage remains high and that Michaels has limited ability to pass tariff costs to a stressed consumer. S&P flagged continuing China exposure despite the domestic framing manufacturing. The rating is still B-.

Outlook: well positioned or at risk?

At risk — and the bull case is more fragile than the bond price implies. Michaels did real work: it refinanced out of a distressed capital structure, expanded margins, bought its dead rival’s brand for pocket change, moved vendors in weeks rather than quarters, made framing faster and cheaper, and rebuilt loyalty economics. Bonds do not go from 34 to par on narrative. Apollo, to its credit, leaned in hard when the shock hit rather than opening a restructuring conversation.

But look at the causal chain honestly. The two largest inputs to the 2025-26 recovery were a tariff de-escalation Michaels did not negotiate and the liquidations of Joann and Party City, which Michaels did not cause. Both are one-time transfers, and comps built on a competitor’s closed store eventually lap. Tariff policy is a headline away from reversing, and both rating agencies say Michaels cannot pass those costs on.

The initiatives that would prove structural growth remain unproven. MakerPlace is fee-competitive with Etsy and network-uncompetitive, which is the wrong half of the equation. The reimagined store format is one location in Columbus. The framing bet is smart and tariff-immune, but it is also the most-complained-about product the company sells, executed by a store workforce that is smaller and more thinly stretched than it was two years ago.

The most likely outcome is an IPO in the next 12-24 months into a market that remembers 2014: Apollo prints a good return on the deleveraging and the bond recovery, and the public shareholder inherits a $3.7B-plus debt stack, high China exposure and a comp base built on windfalls. Michaels has bought itself years of runway — genuinely well-earned. It has not shown it can grow once the gift stops repeating.

Sources and further reading

• Bloomberg (via FashionNetwork) — Michaels Crafts stages unlikely comeback under Apollo, 7 July 2026
• Bloomberg — Michaels taps bond rally with $1.1 billion loan led by UBS, 11 February 2026
• S&P Global Ratings — The Michaels Cos. Inc. outlook revised to positive, February 2026
• Apollo Global Management — Completion of the tender offer for shares of The Michaels Companies, April 2021
• CNBC — Crafts retailer Michaels to go private in $3.3 billion deal with Apollo, 3 March 2021
• Blackstone — Michaels Stores completes merger with Bain Capital and Blackstone affiliates, October 2006
• Axios — Joann to liquidate all stores, 24 February 2025
• PR Newswire — Michaels unveils revamped Rewards program, 2 March 2026
• PR Newswire — The Michaels Companies appoints David Boone as CEO, February 2025
• EcommerceBytes — Michaels launches handmade marketplace with unique revenue opportunities, 7 August 2023
• Glassdoor — Michaels employee reviews (accessed July 2026)
• Trustpilot — Michaels Stores customer reviews (accessed July 2026)