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Hancock drives sales, earnings up

With sales gains in home decorating fabrics and accents leading the way to drive same-store sales higher, Hancock Fabrics netted an increase in sales and earnings in the third quarter.

The company's net income topped $5.8 million, nearly 56 percent ahead of the third quarter in 2001. Operating income grew by more than 40 percent, to $10.6 million. Sales increased by almost 9 percent, to more than $112.9 million.

"Our business has been consistently strong through the first three quarters of the year," said Larry Kirk, ceo. "Comp-store sales in the third quarter increased 6.3 percent over a 5.7 percent gain a year ago and increased almost 7 percent in the first 39 weeks of 2002, following a rise of 3.1 percent in the same period of 2001."

Kirk also noted Hancock's ability to keep its financial house in order. "The gross margin rate in the quarter was virtually identical to the prior year," he said, "and expense percentages were sharply lower as a result of better cost control and the leverage from the higher sales."

Indeed, Hancock shed 160 basis points from its ratio of selling, general and administrative expenses to sales, to 41.3 percent in the third quarter. The retailer boosted its average gross margin by 50 basis points, to 50.7 percent.

Regarding sales, Kirk said, "Home decorating fabrics and accents continue to lead sales gains in our stores. The store-within-a-store home decor concept is now operating in 254 stores, and another 30 or so will be installed in the fourth quarter." The ceo also observed that sales of quilting products, apparel fabrics and accessories contributed as well.

Looking ahead, Kirk noted that Hancock posted strong gains in the 2001 fourth quarter which may be hard to match this year.

Hancock Fabrics Inc.

Qtr. 11/3 (x000) 2002 2001 % chg
Net sales $112,933 $103,753 8.8
Oper. income 10,612 7,562 40.3
Net income 5,806 3,728 55.7
Per share (diluted) 0.31 0.22 40.9
Average gross margin 50.7% 50.2%
SG&A expenses 41.3% 42.9%
9 months 2002 2001 % chg
Net sales 309,663 288,184 7.5
Oper. income 21,675 15,868 36.6
Net income 11,082 6,806 62.8
Per share (diluted) 0.59 0.40 47.5
Average gross margin 50.8% 50.0%
SG&A expenses 43.8% 44.5%


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