Michaels Survived the Tariff Threat by Betting on Bankruptcies

Apollo Global Management paid $3.3 billion for Michaels in 2021, right as craft retailers started collapsing. That timing looked questionable. Within two years, Joann and Hobby Lobby were bleeding customers, A.C. Moore had shut its doors entirely, and tariff escalation under the Trump administration had hit craft imports hard, paints, textiles, wooden blanks, foam sheets, all subject to levies that ran as high as 25% on certain Chinese goods.

Michaels didn't avoid the tariff hit. What it did was wait for competitors to absorb worse versions of the same problem.

The tariff squeeze hit harder where balance sheets were thinner

Joann filed for Chapter 11 in March 2024. The company had been carrying roughly $1 billion in debt and operating on thin inventory turns even before tariffs pushed up cost of goods. When your working capital is already stretched and your supplier suddenly wants 18% more per container, you either raise prices and lose traffic or hold prices and lose margin. Joann tried both. Neither worked.

A.C. Moore liquidated in 2019, before the worst of the tariff cycle, but for related reasons, it couldn't compete on assortment or price with bigger players and couldn't move inventory fast enough to justify the rent. Hobby Lobby, still privately held and better capitalized than Joann, survived but closed underperforming locations in 2023 and 2024, pulling back from markets where Michaels had denser store networks.

Michaels, now private under Apollo, used that contraction as acquisition opportunity. It didn't buy the bankrupt chains outright. It picked up their customer lists, targeted former Joann shoppers with direct mail, ran地区-specific promotions in markets where A.C. Moore had closed, and shifted inventory into stores near shuttered competitors. Apollo had the balance sheet to carry higher input costs for two years while waiting for rivals to fold. Joann and A.C. Moore did not.

Scale absorbed what independents couldn't

The tariff threat mattered less at 1,200 stores than at 120. Michaels could renegotiate with suppliers, shift sourcing to Vietnam and India for specific product categories, and spread the per-unit cost increase across a larger base. A regional chain ordering 5,000 units of acrylic paint ate the tariff as a direct hit to margin. Michaels, ordering 400,000 units, had leverage to push some of the cost back onto the supplier or at least delay the pass-through.

This wasn't sophisticated strategy. It was just having more room to move. Apollo's equity cushion meant Michaels didn't have to optimize every quarter. Joann, answering to public markets until its bankruptcy, did. When comparable-store sales dropped 4.7% in Q4 2023, Joann had no time to wait it out. Michaels, private, could.

What's left is a tighter oligopoly

The craft retail sector is now effectively Michaels and Hobby Lobby, with a fragmented tail of independents who serve niche demographics, quilting shops, fine-art suppliers, specialty yarn stores. The independents survived by not competing on the same inventory. Michaels survived by outlasting the mid-tier chains that tried.

The tariff environment hasn't eased. The current administration kept most of the levies in place. What changed is that fewer players are left to fight over the same customer. Michaels didn't win by dodging the tariffs. It won because its competitors couldn't survive them long enough to see what came next.