Hancock Fabrics doubles 2Q earnings
Don Hogsett -- Home Textiles Today, September 9, 2002
As shell-shocked, cash-strapped consumers start to do it themselves rather than buy some home-decorating products readymade, fabric and home-sewing retailer Hancock Fabrics more than doubled its second-quarter profits, pushing earnings up by 160.2 percent, to $1.5 million from $590,000 last year, in what is historically the slowest financial quarter for fabric and crafts retailers.
Capitalizing on an accelerating trend, Hancock pushed sales higher by 6.8 percent, to $92.7 million from $86.8 million last year. Same-store sales advanced by 7.3 percent, far outpacing results for most other American retailers in a persistently weak environment.
'The second quarter is the seasonally slowest of the year, but we had good business and got a lot of things done," said Larry Kirk, ceo. "The store-within-a-store concept in home decorating has now been installed in 225 stores and should be operating in almost 300 stores by year's end. The home decorating category has now climbed to 29 percent of sales, from 25 percent a year ago."
Another new focus, said Kirk, "is quilting.
"We are making notable progress in [that] business, and a new cut-to-order program in special occasion merchandise will be introduced in September. Seasonal merchandise is arriving in our stores now, and we believe that we are well prepared for the big half of the year."
Driving profits higher, in addition to stronger sales, were wider margins at the fabric and crafts retailer. Average gross margin improved by 90 basis points, to 51.3 percent from 50.4 percent the prior year. Gross margin dollars grew by 8.8 percent, to $47.6 million from $43.7 million a year ago.
Propelled by the stronger sales and margins, operating profits in a historically weak quarter almost doubled, rising by 88.8 percent, to $2.5 million from $1.3 million.
In another big lift to the bottom line, Hancock paid down debt and reduced its interest costs. Interest expense was slashed by 77.5 percent, to $94,000 from $417,000, as long-term debt was cut by more than half, by 59.3 percent, to $11.0 million from $27.0 million a year ago.
Hancock Fabrics Inc.
|Qtr. 8/4 (x000)||2002||2001||% chg|
|Oper. income (EBIT)||2,486||1,317||88.8|
|Per share (diluted)||0.08||0.03||166.7|
|Average gross margin||51.3%||50.4%||—|
|Six months||2002||2001||% chg|
|Oper. income (EBIT)||8,388||5,581||50.3|
|Per share (diluted)||0.28||0.18||55.6|
|Average gross margin||50.9%||50.0%||—|