By Michelle Cheng and Reshmi Basu | Bloomberg
When Michaels Cos. tapped a new CEO in early 2025, the company’s chairman, 25-year Apollo Global Management veteran Andrew Jhawar heralded the moment as “an exciting period of opportunity” for the retailer.
As the dust settles some 16 months later, that’s looking like an understatement.
Michaels’ overhaul is readily apparent in stores, where balloons that were once a hallmark of bankrupt Party City now line the entrances. The company also swooped in to buy the intellectual property and brands of fabrics retailer Joann, which collapsed into Chapter 11 twice in the span of a year, adding yarn and sewing machines to its inventory.
Meanwhile on Wall Street, Michaels accomplished a rare feat: The company’s bonds traded as low as 34 cents on the dollar last year, a level that usually indicates a restructuring is inevitable, but roared back close to 100 cents, giving it the chance to bolster its finances through the credit markets.
Some observers chalk up the swift maneuvers to the fact that Michaels is owned by Apollo, the investment giant that made its name by throwing sharp elbows in distressed investing and corporate turnarounds. The firm bought the retailer five years ago, meaning it’s coming up on the time when private equity starts looking for an exit. For Michaels, that would most likely be an initial public offering, people familiar with the matter said, though no timeline has been set for a possible listing.
In the meantime that new chief executive officer, David Boone, is focused on opening re-imagined stores, with features designed to appeal to customers’ desire for hands-on experiences and customization. The first opened this month in Columbus, Ohio, and will bolster the company’s offerings of in-person events like junk journal making and watercolor cards. More will open later this year.
Michaels “had a reputation for being your grandmother’s store,” Boone, 57, said, while the new features make for “a complete transformation of this brand to be much more culturally relevant.” The chance to build with some of its rivals’ offerings was, he said, “a once-in-a-generation opportunity for the company.”
The rush to capture market share has also revitalized Michaels’ bottom line. Its first quarter sales and adjusted Ebitda both grew by double digits, according to people familiar with the matter. Inventory swelled by 20% as the company gets ready for the busier second half, they said, asking not to be identified discussing private financial details.
For now, Michaels’ leverage remains high, and was cited as a potential credit challenge for the company by ratings agency Moody’s Corp. in a February report. The credit grader, which rates Michaels’ overall credit outlook as stable, expects the company’s leverage to improve to 5.5x this year. Free cash flow is expected to be positive for 2026.
Representatives for Apollo and Michaels declined to comment on specific financial details.
‘More decisive’
Being privately held means Michaels has been able to move faster and make riskier bets than its public rivals, said Neil Saunders, a retail analyst at GlobalData. That gave it an advantage as debt-laden public companies like Joann and Party City started to fail, even as each business faced the same challenges: inflationary pressure, a slump in discretionary spending and competition from e-commerce giants like Amazon.com Inc. and Walmart Inc.
“If you are owned by private equity, you can just generally be a much more decisive business,” Saunders said. “You don’t have to work through everything that a public business would have to work through.”
In Apollo, Michaels had the backing of one of the world’s largest alternative asset managers to help it expand product lines like yarn and fabric, which were a natural add-on to what customers would already be looking for in store. The closely held retailer was also insulated from the pressure of delivering quarterly results.
Just two months after Joann’s second bankruptcy in January 2025, Michaels hosted a conference call with nearly a hundred vendors, including many who’d supplied the defunct store with fabrics and were looking for a new retailer. It urged them to work with Michaels to bring their products into its store as quickly as possible, instead of shopping around.
“If somebody exits the market or restructures, those sales tend to get dispersed among lots of different players in the market,” said Boone, who previously led Staples Canada.
The move was just part of the retailer’s strategy to go after customers before others could take advantage of the moment. Michaels also sped up its product timeline, bringing new items into stores without the usual pilot schemes and trial periods that could stretch into a multi-year process, Boone said in an interview.
But as the company was moving fast, so was President Donald Trump. In early April 2025, less than three months after his second inauguration, the president laid out plans for the largest US tariffs on imported goods in modern history. The US and China — where a huge share of Michaels’ merchandise is made — volleyed new duties back and forth, with taxes on imports from China at one point hitting 125%.
The announcement sparked crisis calls inside the company over tariffs that could have led to a liquidity crunch, according to a person familiar with the matter. In May, Michaels’ bonds due 2029 fell to trade at just 34 cents on the dollar. During this period, Apollo took on a much more hands-on role than usual, talking on the phone with Michaels’ management several times a day for multiple hours, according to another person familiar with the matter.
Luckily for Michaels, the US and China agreed on a significant reduction of tariffs in mid May, the company’s bonds rallied and restructuring talk was put aside. Now, Apollo’s representatives speak to Michaels’ management on a regular weekly call, with occasional ad hoc check-ins to share information about the industry or a competitor, the person said.
The turmoil came less than two months after Boone took the CEO role, and in the middle of an auction for Joann’s intellectual property. Despite the backdrop, Michaels and Apollo were keen to outbid rivals, and ultimately paid less than $10 million to clinch a deal for the Joann name and some of its private labels, said the person familiar.
After the deal, it launched a dedicated landing page for Joann’s customers looking for their favorite products, including a large welcome banner. “It’s hard to lose a store you love,” the banner read. “We’re here to help.”
Craft circles
On a recent Thursday in a Michaels store in Brooklyn, New York, aisles close to the entrance were stacked with Memorial Day decor. Stark, fluorescent lighting lined the ceilings, but not all of them were on, leaving parts of the store brightly illuminated while other sections were dim.
In one of the aisles upstairs, Nicole Itzkowitz was browsing for fabric dye so she could refresh her canvas bag instead of buying a new one. Itzkowitz, 31, said she’d been in Michaels just a week earlier, too, buying knitting needles for one of the craft circles she’s a part of.
“As I’m getting older, I’m not going out the same way I was, but not going out you lose some of the social connections,” said Itzkowitz, a PhD student at Columbia University’s Mailman School of Public Health, who joined the knitting groups as a new way to socialize.
Almost three-quarters of adults in the US participated in at least one craft activity last year, according to market research firm Mintel Ltd. Crafting grew in popularity during the pandemic, and has stayed on trend as increasing digital fatigue motivates people to seek more analog hobbies.
“People are interested in those sorts of quieter, more fulfilling types of activities in what is a very noisy world,” retail analyst Saunders said. “I think that’s Michaels’ sweet spot.”
Michaels continues to face a host of other competitors, both from dedicated arts-and-craft chains like Hobby Lobby Stores Inc. and retail giants like Amazon and Walmart. But Boone said what sets Michaels apart is the sheer variety of products available in its stores for customers to choose from, in person.
Tasha Washington-Lee, 55, who was shopping at the Brooklyn Michaels for yarn to build a doll, agrees. Washington-Lee said she likes how at Michaels you can get sharpies in every skin color.
Higher costs
But as Michaels works to bring more items to its stores, the company also faces higher costs. Despite efforts to diversify its supply chains away from high-tariff countries — its custom frames, for example, are manufactured in Texas and North Carolina, and it’s working on making more party supplies locally — the company still has significant exposure to China, according to an S&P Global report.
Any additional tariffs on imports from China could hurt margins, given the company’s limited ability to pass on price increases to already stressed consumers, Moody’s analysts wrote in their February report.
The war in Iran has also driven up fuel costs and made moving goods more expensive. To save on fuel, Boone said, Michaels is loading more onto each of its delivery trucks while reducing the number of trips the trucks make.
What matters most, he said, is figuring out what customers want most and delivering those products quickly — without getting distracted by items that shoppers don’t care about.
“They come because they have a passion for it,” Boone said. “So we are working very hard culturally to live up to that standard.”