Jo-Ann records 1Q deficit of $6.4M

Don Hogsett, May 28, 2001

Hudson, OH — Getting the new year off to a rocky start — and forecasting a loss for all of this year — Jo-Ann Fabrics Inc. recorded a first-quarter deficit of $6.4 million vs. a prior-year profit of $3.0 million.

Sales at the nation's largest fabric and crafts chain edged up by 1.1 percent, to $328.9 million from $325.4 million last year. But same-store sales dipped by 2.0 percent, up against a 5.6 percent gain the prior year.

Weighing on the bottom line, in addition to lower same-store sales, were margins weakened by a deteriorating shrink rate in the company's stores and sharply higher costs. Acting as a further drag, the retailer posted a one-time, after-tax charge of $600,000 stemming from the early retirement of debt.

Costs, in line with company expectations, jumped up by 320 basis points, to 43.6 percent of sales from 40.4 percent last year, hurt by lower same-store sales, higher utility costs and higher distribution expense stemming from the opening of a new West Coast distribution center.

Average gross margin eroded by 90 basis points, to 45.9 percent from 46.8 percent a year ago, stung by a weakening in shrink rates. So far, about 36 percent of Jo-Ann units have completed a physical inventory, recording a 50 basis-point deterioration in the shrink rate, the company said. "Consequently, shrink expense was $4.3 million worse on an after-tax basis, or $0.23 per share," than the historical shrink rate, the retailer reported.

Due to the eroding shrink rate, average gross margin came in lower than expected, "and more than offset the rate improvement we achieved in gross margins from product sales," said Alan Rosskamm, chairman and ceo. "We are aggressively pursuing the causes of our negative shrink results, and shrink reduction will become an additional focus of our turnaround plan."

If current shrink trends persist through the balance of the year, the company said 12-month results could be hurt by $9 to $10 million in after-tax shrink costs.

Jo-Ann Stores Inc.

Qtr. 5/5(x000) 2001 2000 %CHG
a-Results in the first quarter include an income-tax benefit of $3.5 million, compared with a tax provision of $1.9 million last year; and a one-time, after-tax charge of $600,000 stemming from the early retirement of debt.
Sales $328,900 $325,400 1.1
Oper. income (EBIT) (2,100) 11,800
Net income (6,400)a 3,000a
Per share (diluted) (0.35) 0.17
Average gross margin 45.9% 46.8%
SG&A expenses 43.6% 40.4%

Featured Video

  • Live From New York: Fashion Comes Across the Pond

    Camera Icon More Videos

Subscribe to
Home & Textiles Today eDaily
Receive the news you need to know about the trends in the industry delivered right to your inbox.


HTT Cover October 2017

See the October 2017 issue of Home & Textiles Today. In this issue, we look at the Top 25 Online Retailers.  H&TT's exclusive annual ranking of the biggest online sellers of home textiles finds that while pure play etailers continue to fly, bricks & clicks are digging into omnichannel. See details!