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Michaels Uses Tariff Refund to Cut Debt, Lower Leverage

Published Sep 15, 2026
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Summary:
  • Michaels recorded over $170 million stemming from IEEPA tariff reimbursements with interest, then put the proceeds toward reducing risk.
  • The retailer retired $101 million of its 11% second lien notes; those bonds changed hands near 97 cents per dollar of face value on Monday, about a penny above last week.
  • With the refund and buyback, people said net leverage fell to 4.8x earnings versus 6.3x a year ago, and adjusted EBITDA came in at $178 million for the quarter.

What Michaels did

Michaels, owned by Apollo Global Management Inc., leaned on a surprise cash inflow from tariff refunds to improve its balance sheet, per people with knowledge of the situation who discussed private details. The company repurchased $101 million of its 11% second lien debt as part of the effort. Those same notes were quoted around 97 cents per dollar on Monday, roughly 1 cent higher than the prior week, Bloomberg pricing shows.

The quarter in numbers

In preliminary second quarter results, Michaels said it took in more than $170 million tied to IEEPA tariff refunds, with interest included. With that benefit, adjusted EBITDA landed at $178 million, versus about $104 million in the year-ago period. Without the refund, that measure would have come in at roughly $94 million, according to some of the people.

Gross profit totaled $522 million, translating to a 46.6% margin with the refund; excluding it, margin would have slipped from a year earlier to 33.1%. Comparable sales climbed 4.5% year over year, and total revenue increased 4.8% to $1.12 billion.

A thoughtful approach to debt and cash can help protect your financial progress. Join Briefs Finance CEO Jaspreet Singh on September 29th for a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, where he shows how we're spotting investment opportunities as the dollar falls. Save your spot.

What it says about the business

Apollo bought Michaels about five years ago, and the chain has scooped up assets from bankrupt rivals like Party City and Joann while riding a fresh wave of interest in arts and crafts. Bloomberg has reported Apollo is nearing the time it typically considers exiting an equity position, with an initial public offering seen as the most likely path for Michaels. For now, the latest quarter shows the tariff refund and a targeted $101 million debt repurchase helped reduce leverage to 4.8x earnings versus 6.3x a year earlier.

Why it matters for your money

Profits getting a one time lift from a refund are not the same as a lasting earnings jump, but turning a windfall into lower leverage can make a company sturdier heading into a choppy economy. If an IPO comes into view, a cleaner balance sheet and steady comp growth are the kind of fundamentals everyday investors tend to look for when sizing up a brand they know from weekend craft runs.

Keeping a steady plan around leverage and savings supports long term wealth growth. Our CEO Jaspreet Singh is hosting a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, on September 29th. Sign up free to join him live.

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