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Hancock grows 1Q profits by 14%

TUPELO, MS — With same-store sales edging higher and margins firming up, Hancock Fabrics Inc., a fabric and crafts chain, pushed first-quarter profits up 14.0 percent, to $2.5 million from $2.2 million last year.

The number Wall Street watches — earnings per share — shot up even faster, rising by 25.0 percent, to $0.15 from $0.12 a year ago, as the retailer continued to buy back its own shares.

Sales dipped slightly, by 0.5 percent, to $97.6 million from $98.1 million last year, as the chain closed seven stores and opened three others. More importantly, same-store sales advanced by 1 percent.

Giving a lift to the bottom line, average gross margin improved by 70 basis points, to 49.6 percent from 48.9 percent the prior year. Gross margin dollars increased by 0.9 percent, to $48.4 million from $48.0 million.

Partially offsetting the stronger margins, operating costs climbed higher as well, moving up by 50 basis points, to 43.9 percent of sales from 43.4 percent a year ago. Measured in absolute dollars, costs ticked up by 0.5 percent, to $42.8 million from $42.6 million.

Giving an extra kick to earnings, the retailer slashed its interest costs by 42.5 percent, to $397,000 from $691,000 the previous year, a cash savings of $294,000.

Larry G. Kirk, ceo, commented, "Although our business may not be impacted by the general economic weakness as much as some other retailers, there is no question that customers are more hesitant than they were at this time last year. The higher gross margin was once again due to the ongoing shift in our merchandise mix, better obsolescence management and rational price promotion."

Going forward, said Kirk, "We will continue to focus on improving our merchandise mix by aggressively installing the Waverly Showcase home decorating concept, enhancing our quilting assortments to better meet the needs of this significant base of customers."

Hancock Fabrics Inc.

Qtr. 4/29(x000) 2001 2000 %CHG
Sales $97,616 $98,123 -0.5
Oper. income (EBIT) 4,264 4,072 4.7
Net income 2,488 2,183 14.0
Per share (diluted) 0.15 0.12 25.0
Average gross margin 49.6% 48.9%
SG&A expenses 43.9% 43.4%


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