Jo-Ann Exceeds Expectations with 3Q Results
December 7, 2009-- Home Textiles Today,
Jo-Ann Stores Inc.'s strong third-quarter performance was attributed in part to the company's positive trends in its core sewing and craft categories, especially fabric.
"Our financial results exceeded original expectations and earnings per share came at high end of our pre-announced range," said Darrell Webb, chairman, president and ceo. "Positive customer response to our core sewing and craft merchandise continues to drive sales growth, while our sourcing, inventory management, and expense control initiatives allowed us to achieve gross margin expansion and expense leverage."
The shift is largely due to taking category-specific market share from Jo-Ann's competitors, most importantly, Walmart, the company said.
"The competitive environment is providing an opportunity for Jo-Ann Stores to increase market share," Webb continued. "In the specialty retail channel, we believe we are capturing share from weaker competitors based on our sales trend relative to other craft and fabric retailers. In addition, Walmart continues to remove fabric departments as they remodel stores, which is providing further opportunity to build share."
Jo-Ann's sewing business, which includes fabric, represented 55% of its third-quarter sales volume and increased 8.1% on a same-store sales basis. "We continue to experience positive same-store sales in the majority of our fabric and sewing notions merchandise categories," said James Kerr, evp, cfo.
By comparison, the retailer's non-sewing business represented 45% of third quarter sales volume and increased 0.1% on a same-store sales basis — the result of positive performance in core craft categories offset by continued weakness in seasonal and custom framing.
Net income for the quarter was $24.1 million or 90 cents per share versus $10.2 million or 40 cents per share for the year-ago period. The company noted that last year's third-quarter net income includes a $1.3 million after-tax gain, or 5 cents per share, related to the purchase of a portion of its senior subordinated notes. Excluding this gain, net income for the prior year third quarter was $8.9 million or 35 cents per share.
Sales for the period increased 6.0% to $509.1 million from $480.1 million, and same-store sales increased 4.3% compared with a 1.5% same-store sales decrease for the third quarter last year.
Broken down by store size, large-format store sales for the quarter increased 8.7% to $272.0 million compared to the same period last year and same-store sales increased 2.3% compared with a decrease of 3.8% in the same period last year. Small-format store sales for the quarter increased 3.0% to $228.5 million compared to last year and same-store sales increased 6.7% compared with an increase of 1.2% a year ago.
Internet sales through Joann.com for the quarter increased 6.2% to $8.6 million compared to the same period last year.
Year to date, net income jumped to $29.5 million or $1.12 per share from $1.5 million or 6 cents per share in the year-ago period.
Sales rose 4.5% to $1.39 billion versus $1.33 billion in the prior year period, and same-store sales increased 2.5% for the nine-month period compared with a 1.9% increase last year.
By store size, large-format store sales for the first nine months increased 7.4% to $747.1 million and same-store sales increased 0.7% versus a 0.3% increase last year. Small-format store sales increased 1.0% to $615.8 million and same-store sales performance increased 4.7% versus a 3.7% increase in the prior year.
Internet sales through Joann.com for the nine-month period increased 9.4% to $25.6 million compared to the prior year.
Encouraged by its recent uptick in sales trends over the past few quarters, Jo-Ann is on plan to expand its store base and remodel existing sites. In the third quarter, the initiative resulted in four new store openings, eight remodels and 85 store optimization projects. By end of this fiscal year, Jo-Ann is on track to complete another 20 new store openings, 30 remodels, and more than 180 store optimization projects.
For next year, Webb said the retailer plans to increase this activity by opening about 30 new stores, including several small formats of 15,000 square feet in smaller markets where Walmart has exited the fabric business.
"We are committed to growing and improving the quality of our store portfolio, as we maintain strong operating disciplines and focus on enhancing the shopping experience for our customers," Webb added. "We believe our strategic plan will provide sustainable growth in sales and profitability over the years to come."
Jo-Ann's fiscal 2010 outlook calls for the retailer maintaining its same-store sales and earnings per diluted share expectations. The company also updated aspects of its outlook for the full year.
The company expects a same-store sales increase of approximately 2.3% to 2.7% for the year, improved gross margins, and net income in the range of $1.95 to $2.05 for the year, excluding any gains on debt purchases.
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