Michaels Survived the Craft Store Collapse by Becoming the Last One Standing

Apollo Global Management bought Michaels in 2021 for $5 billion, right when craft retail looked like a closing chapter. Hobby Lobby was the privately held juggernaut. Jo-Ann Fabrics was limping. Michaels itself had been public, then private, then public again, carrying a balance sheet that reflected every bad decision of the 2010s.

Three years later, Michaels is the last national chain still opening stores.

The field thinned faster than anyone planned

Jo-Ann filed for bankruptcy in March 2024, emerged under new ownership, and immediately started closing locations. A.C. Moore shut down entirely in 2019, selling its leases to Michaels. Bed Bath & Beyond, which competed indirectly through its home décor sections, collapsed in 2023. Hobby Lobby remains standing but has stopped expanding at the pace it maintained through the 2010s. The result is a craft retail landscape that now has exactly one operator with the capital and the inclination to grow.

That operator spent the last three years doing something most retailers avoid: cutting SKU count while adding square footage. Michaels reduced its product assortment by roughly 30%, dropping the marginal seasonal items and low-turn categories that made inventory expensive to carry. It used the freed-up space to expand higher-margin private label lines and dedicated sections for custom framing, which runs at roughly double the margin of packaged craft supplies.

The tariff threat that hung over the sector in 2018 and 2019 hit Michaels harder than Hobby Lobby, which manufactures more of its own goods domestically. Michaels imports heavily from China for basics like brushes, canvases, and wooden craft components. When Section 301 tariffs came into force, gross margins compressed. The company's response was to renegotiate supplier terms and shift some sourcing to Vietnam and India, but more importantly, to pass the cost through to customers in categories where it had pricing power, framing, higher-end paint sets, specialty papers, and eat it in categories where it didn't.

Apollo's advantage here was patience. A public Michaels would have had to explain margin compression every quarter. A private one could take the hit in 2022 and 2023 while waiting for competitors to fold.

What actually changed on the floor

Walk into a Michaels in 2024 and the layout reads differently than it did in 2019. Framing occupies a quarter of the store, not a corner. Seasonal rotates faster. The yarn section, once sprawling, is now half the size, focused on premium brands rather than bulk acrylic. The shift mirrors what's working in grocery: fewer SKUs, better turns, more private label.

Custom framing is the anchor. Michaels claims it's now the largest custom framer in North America, processing over 12 million orders annually. Framing is both high-margin and sticky, once a customer uses Michaels to frame something meaningful, they tend to return. It also can't be replicated online in the same way a bag of pom-poms can.

Apollo has said publicly it sees Michaels as a 1,500-store chain, up from roughly 1,300 today. The stores it's opening are in second-tier markets where Jo-Ann or a regional player used to operate. The stores it's closing are the 15,000-square-foot boxes in expensive metros where the rent never made sense.

Michaels didn't win by being better. It won because it had access to capital when no one else did, and it used that capital to wait while the rest of the industry ran out of time.