Jo-Ann Says Soft Home Hurt Sales

Anthony Guerra, August 22, 2005

Hudson, Ohio — Jo-Ann Stores, Inc. blamed weakness in soft home for a tough quarter, and noted it would focus spending on areas like crafts and yarn to spur sales in the second half of the year, company executives related during a second quarter conference call last week.

The company stated that softlines and sewing, which represent 57 percent of its overall business, were down 1.6 percent on a comp-store basis.

Alan Rosskamm, chairman and CEO, said lighter-than-expected traffic caused the company to institute heavier promotions, resulting in gross margin rate decline.

“We have not been on top of our game in the past year-and-a-half,” he said.

However, he was optimistic going forward, adding, “We are excited about our product offerings for the third quarter. We have new leadership in seasonal, and we think we have the right merchants in place.”

Rosskamm said the company had opened six superstores and one traditional store in the quarter and closed nine traditional stores. He described the superstore as the company's “primary growth vehicle.”

Subsequent to the end of the second quarter, the company has opened an additional four superstores. Year-to-date, Jo-Ann has opened 21 superstores and two traditional stores and closed 27 traditional stores. For the balance of the year, the company expects to open 19 superstores, two traditional stores and close 25 to 30 traditional stores.

The new traditional stores being opened are not identical to the ones being closed, Rosskamm noted, explaining that the new units mimic the racetrack format of the superstores but are smaller. He added that the company was refining its store opening and closing process.

Jo-Ann also plans to start work on a distribution center in the third quarter which is slated to open in April 2006.

The company reported a net loss for its second fiscal quarter of $5.1 million compared with net income of $300,000 last year.

Net sales for the period increased 3.5 percent, to $383.8 million from $371 million a year ago. Same-store sales decreased 0.5 percent versus a 3.1 percent increase last year.

Net sales for the six-month period ended July 30 were $804.5 million versus $775.9 million last year, an improvement of 3.7 percent. Year-to-date, same-store sales grew 0.1 percent, compared with 4.9 percent a year ago.

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