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Jo-Ann rebounds with 1Q profit

Bounding back from year-ago losses, Jo-Ann Stores Inc. parlayed a trifecta of sharply stronger margins, lower costs and a double-digit gain in same-store sales into a first-quarter profit of $8.7 million, recovering from a loss last year of $6.4 million.

Sales at the nation's largest fabric and crafts retailer jumped up by 13.2 percent, to $372.4 million from $328.9 million a year ago. And the do-or-die barometer of same-store sales jumped up by 13.5 percent, compared with a 2.0 percent increase during the same period last year.

In a strong support to the bottom line, average gross margin expanded by 260 basis points, to 48.5 percent from 45.9 percent the prior year. Margin improvement stemmed from "a less promotional merchandising strategy during the quarter and lower store shrink expense," the retailer said.

At the same time, costs were rolled back by 300 basis points, to 40.6 percent from 43.6 percent, benefiting from "the strong sales trend and cost controls the company has implemented, primarily in-store expenses," the retailer added.

Lifted by the stronger margins and lower costs, the retailer recorded an operating profit of $20.4 million, rebounding from last year's operating loss of $2.1 million.

Saving the retailer even more money, inventories were cut by 16.1 percent from year-before levels, to $400.1 million from $476.7 million.

Alan Rosskamm, chairman and ceo, commented, "The record results for both our fourth quarter last year and our first quarter this year confirm that we are effectively executing our turnaround plan. We are establishing a new baseline for operating and financial performance founded on the improvements we have reaped from our past investments, particularly in information systems and logistics, and from our more recent turnaround initiatives."

Jo-Ann Stores Inc.

Qtr. 5/4 (x000) 2002 2001 % change
a-First-quarter results include an income-tax provision of $5.3 million, compared with a year-ago income-tax benefit of $3.5 million. Prior-year results were also reduced by a $600,000 charge stemming from the early retirement of debt.
Sales $372,400 $328,900 13.2
Oper. income (EBIT) 20,400 (2,100)
Net income 8,700a (6,400)a
Per share (diluted) 0.43 (0.35)
Average gross margin 48.5% 45.9%
SG&A expenses 40.6% 43.6%

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