Wachovia Downgrades Michaels Stores

Analyst Ralph Jean sees weakening fundamentals for the specialty retailer as it heads into the holiday selling season

Wachovia downgraded Michaels Stores (MIK ) to underperform from market perform.

Analyst Ralph Jean cites decelerating fundamentals going into an important holiday selling season. He also cites two downward earnings-per-share revisions in less than two months, increasingly difficult same-store sales performance coming up over next four to six months, and the stock's currently trading at premium valuation.

Jean says that while the company's third-quarter results were slightly better than expected, he's lowering earnings-per-share estimates again. Given the above-mentioned factors, he cuts his 75 cents fourth-quarter earnings-per-share estimate to 73 cents, his $1.47 fiscal 2005 (Jan.) to $1.45, and $1.70 fiscal 2006 to $1.65.