John MenzerChief Executive Officer

An overview of Michaels

Our approach to the current retail landscape

Michaels’ long-term strategy and vision

Current and future industry trends

Q&A

Headlines

North America’s largest arts and crafts specialty retailer

$4 Billion in Sales

37,186 Associates (peak 42,000)

Private Equity Ownership (Bain Capital & Blackstone purchased October 2006)

Corporate Headquarters – Irving, Texas

Framing

General & Childrens

Crafts

Seasonal /Home

Scrapbooking

Broad Selection of Product Categories…

Michaels Stores Overview

44%

17%

21%

18%

Data as of Fiscal 2009.

Jewelry & Beadmaking Apparel Crafts Bakeware Kids Crafts Art Supplies Ready-made Frames Custom Framing Wood Yarn & Needlework Seasonal Home Wedding Ribbon Scrapbooking Floral Impulse

Diversified North American Footprint

With stores in 49 states and 7 provinces, MIK has the broadest industry footprint

Aaron Brothers 145Michaels 1,033

Store count as of August 1, 2010

Company Mission

Be a World Class Performer Inspires and enables consumers

to experience creativity

Leads industry growth and innovation

Creates a fun and rewarding place to work that fosters meaningful connections with our communities

Strengths

Industry Leader We are the largest arts and crafts retailer in North America

Loyal customers

Strongest brand name

Attractive craft market fundamentals Low cost purchase – high utility

Strong cash flow

Our Five Year Strategy

The Strategy Teams

Chef Duff

American Girl

The Strategy Teams

Five-Year Strategy – Private Brands

The Strategy Teams

We will manage our assets to deliver incremental cash flow. We will

improve our inventory turns while achieving World Class in-stocks, and

aggressively manage shrink. Through expense control and process improvement, we will

manage expenses to ensure higher rates of growth in profitability.

Q1 Results (3 months ended April 30, 2010)

Achieved 4.9% growth in same store comparative sales

Increased traffic 1.2% through electronic marketing, bounce-back coupons and newspaper inserts

Continued focus on new merchandise introductions 3.7% increase in average ticket, positively impacted by 160 bps from foreign

currency translation Expanded gross margin through increased direct import penetration and

improved clearance and markdown management Operating income improved 64% to $105 million Reduced per store inventory levels by approximately 4% Resumed historical levels of store openings

Moody’s Investor Service upgraded Michaels’ credit rating – June 2010

Michaels Stores, Inc. Reports Record First Quarter Sales and Operating Income

The Strategy Teams

If Facebook Were a Country, it Would be the Third Largest in the World

China1,338,613,000

Facebook500,000,000

United States307,213,000

India1,156,898,000

Indonesia240,272,000

346 million read 77% of active internet users read blogs

500 million active usersReaches every demographic

75 million usersHighly connected users

122 million active usersThe #9 web domain in the U.S.

The Three Most Popular Twitter Users Would Make the Seventh Largest Global City

POPULATION CITY13,922,125 Mumbai

13,831,900 Shanghai

12,991,000 Karachi

12,259,230 Delhi

11,372,613 Istanbul

11,037,593 São Paulo

10,988,176 Top 3 Twitter Users

10,508,971 Moscow

10,456,034 Seoul

10,123,000 Beijing

FOLLOWERS TWITTER USER3,847,754 Ashton Kutcher

3,576,841 Ellen DeGeneres

3,563,581 Britney Spears

The Strategy Teams

Manhattan store front

Traditional store front

Small Market

The Strategy Teams

Enhancing the In-Store Environment

Visual Merchandising Visually appealing layout Less clutter Ideas in feature space

Exciting Place to Shop Inspirations in feature space Friendly & courteous sales

associates Appropriately staffed Customer focus

The Strategy Teams

Managing In the Current Environment

“The combination of speed to market and innovation is more and more important, Shoppers are saying, ‘Convince me why I need this. Otherwise I’m not showing up.’”

The consumer has changed forever … “The Great Recession” has changed everything.

Value Messages Customer-Centric Communications: Targeted Marketing Multi-Channel Integration: Consistent Messaging & Experience

Value Messages

JewelryBaking

$1 Fun Finds

Classes

Value – price, convenience, quality, service

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Arts & Crafts – Make it Your Own

Creativity happens everywhe

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Industry Trends

Hispanic Customers

China Inflation

Back to School

Hispanic Market

Totaling $818 billion in 2008 and is expected to exceed $1 trillion by 2013

U.S. Hispanics create a new $125 billion market every three years One of the few reliable sources of consumption

growth remaining in the U.S. Largest growth areas: Food, household & personal

goods

Industry Trends

China Inflation

Wages

Commodity Prices

RMD Currency Valuation

Top 10 back-to-school trends for 2010

#1: Think K-12 is the big kahuna? Think again.

#2: Don’t discount dads!

#3: The recession is over? Shoppers didn’t get the memo.

#4: The early bird grabs the deal.

#5: Want to find the big spenders? Go online.

#6: Price is important, but it isn’t everything.

#7: Freshmen aren’t the cash cow of college this year.

#8: College guys aren’t only buying electronics.

#9: Kids are spending through their parents.

#10: Beware of over-emphasizing the holiday implications.

By Ellen Davis, VP and NRF spokesperson | Published: July 29, 2010

Questions & Answers