Jo-Ann profits by niche pursuit
March 13, 2008,
Hudson, Ohio – The decorative fabric and sewing-related businesses can be thanked for helping Jo-Ann Stores enjoy its fourth consecutive quarter of positive same-store sales, the 774-unit chain said during its fourth quarter and fiscal 2008 yearend earnings call yesterday afternoon.
Net income of $27.5 million was 6.6% above last year’s fourth quarter – and for the full year, Jo-Ann swung from a fiscal 2007 loss of $1.9 million to a fiscal 2008 profit of $15.4 million.
Full-year sales of $1.88 billion edged up 1.6% from $1.85 billion, translating to a 3.5% comp gain based on comparing 52-week periods (fiscal 2007 had 53 weeks).
The results were encouraging for Jo-Ann, which is planning conservatively but optimistically for the new fiscal year, 2009.
With Wal-Mart Stores exiting the fabric business in some markets it shares with Jo-Ann, coupled with a historical resilience of fabric and craft retailers during challenging economic periods, Jo-Ann Stores expects to enjoy some “insulation” from the looming recession.
“We will continue to execute our strategic plan, and continue to take advantage of competitive withdrawals from the fabric business,” said Darrell Webb, chairman, president and ceo. “We also expect to be insulated from a downturn to a certain extent by the strong demographics of our shoppers and the steady performance of the sewing and craft industry in previous recessions.”
Webb bases the theory on a report that references successes seen at fabric and craft stores during recent past recessions in 1991 and 2001, when he said, “Retailers in the craft and sewing businesses had better same-store sales increases than the prior and following years.”
“Clearly, I’m not suggesting that we’re going to expect some big benefits from a recession. But I do think this industry, this segment of retail, is a little bit insulated from the overall downturn compared to other retailers,” Webb noted.
The chain is alert to new real estate openings for its smaller format stores.
“We see an opportunity to open more stores in the 20,000-square-foot range in markets that don’t have a fabric store today, maybe where Wal-Mart has exited the business in small communities,” Webb said.
Jo-Ann plans to open 12 to 15 new stores and remodel about 25 to 30 stores this year, while closing about 25 units. In coming years, the plan grows more ambitious.
“Our thinking right now is that we would incrementally open an additional 10 stores per year over the next few years,” Webb explained. “Guidance for this year is 12 to 15; we would hope to be looking at 22 to 25 next year and continue that kind of growth in the next few years.”
Square-footage-wise, Jo-Ann Stores has determined “we can fit everything we need in a 30,000-square-foot store” on the large end, with the 20,000-square-foot size ideal for the small end of the scale, Webb concluded.
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