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Home fabrics sales hurt Hancock in Q3

BALDWYN, Miss. — Sales of home decorating fabrics, which had been on the upswing for several years, took an unexpected downturn at Hancock Fabrics, Inc., contributing to a quarter that saw overall sales down 2.5 percent, company executives said during a conference call earlier today.

"There were a number of bright spots in our product mix including quilting, active wear, crafting fabrics and embellishments, home accents and certain apparel groups. However, for the first time in many years, sales of home decorating fabrics declined, giving us perhaps the most revealing insight into today's reluctant consumer," said Larry Kirk, Hancock Fabrics CEO.

Contributing to the tough quarter, said Kirk, were the lingering financial effects felt from the company's move to a new distribution center here ($21 million cost), implementation of new point-of-sale technology in 382 stores ($3 million cost) and supply disruptions caused by clogged shipping and railways lines into the country.

"Despite the recent results, we believe very strongly in the growth prospects in home decorating, and our commitment to the (home decorating fabrics) category will only increase over time. In any case, we will adapt to changing conditions as necessary and spend most of our time and effort on utilizing the new distribution facility and store information systems to greater advantage," Kirk concluded.

Kirk said he was also optimistic about the soon-to-launch Laurie Smith lines. The designer/personality from TV's "Trading Spaces" was recently tapped to create exclusive product lines for Hancock's fabric and home decor stores. Those lines should appear in March, said Kirk.

Smith's product lines at Hancock will primarily be for home decorating and are intended to give customers ideas for apparel, quilting, purse-making and other creative projects. The first Laurie Smith products will join the Martha Pullen Collection, which is targeted at Pullen's following of sewing and quilting enthusiasts.

Kirk, who in October announced his intention to retire no later than October 2006, said the company will provide an update on its CEO search in December.

The company's third-quarter profit plunged 77 percent to $977,000, or 5 cents per share. Sales fell 3 percent to $109.9 million, with comps dropping 2.6 percent.

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