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Jo-Ann Stores 2Q Hits Record Sales and Earnings

HUDSON, OHIO - Jo-Ann Stores churned record sales and earnings during the second quarter. It was also the first time in five years the fabric and crafts chain generated positive 2Q earnings.
     "Our sales are a lot stronger than expected, driven by the performance of our new stores, our store remodels and our outstanding new product assortments," said Darrell Webb, chairman and ceo, during the company's quarterly conference call.
     For the second quarter, ended July 31, net income was $5.4 million, or 20 cents per share, compared with a net loss of $3.2 million, or 13 cents per share, for the second quarter last year.
     Sales rose 4.7% to $439.3 million from $419.4 million for the same period last year. Comps were up 4.4% compared with a 1.8% same-store sales increase for the second quarter last year.
     By store segment, large-format stores' sales for the quarter increased 3.9% to $238.2 million and comps increased 3.0%. Small-format store sales climbed 5.4% to $192.4 million, with comps up 6.2%. Internet sales through Joann.com rose 16.0% to $8.7 million.
     Webb noted that sales growth in Jo-Ann's smaller format stores continue to outpace larger format stores.
     "This reflects how well our remodel and optimization programs are working in our smaller format stores as well as the disproportionate benefit they received from Walmart removing fabric departments," he said.
     By product category, sales growth "was well proportioned across our sewing and non sewing business," Webb said, in particular sewing machines, quilting, and sewing notions as well as craft textiles, among others.
     Net income for the first have more than quadrupled to $23.6 million, or 87 cents per share, from $5.3 million, or 21 cents per share, in the first six months of 2009.
     Sales for the same period rose 4.6% to $919.6 million, and comps were up 4.2% Large-format store sales increased 3.9% to $496.1 million, with comps up 2.4%.
     Sales at small-format stores rose 5.1% to $404.5 million and comps were up 6.6%. Internet sales increased 11.8% to $19.0 million.
     Jo-Ann Stores also announced it will step up new store openings in fiscal year 2012. The retailer will increase capital spending for new stores next year for at least 50 new units and remodels at 50 existing sites. The average size of the new stores will be 20,000 square feet, and at least half will be located in new trade areas.
     For fiscal 2011, the company expects to open approximately 30 new stores and close about 25 stores, and plans to remodel at least 40.
     In addition, Jo-Ann raised its outlook for the full fiscal year. Same-store sales are expected to increase 3.0% to 4.0% for the year versus the previously announced range of 2.5% to 3.5%, and gross margin rate improvement is projected at 70 to 90 basis points versus the earlier range of 40 to 70 basis points.

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