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Jo-Ann Stores improves profitability

Hudson, Ohio – Jo-Ann Stores saw a 6.0% falloff in fourth-quarter same store sales and a 5.9% drop in same-store sales for all of 2006 -- but management said this was part of the impact of “planned reductions of holiday inventory and less clearance merchandise,” which are essential parts of the turnaround plan that has generated positive results in earnings, gross margins, and debt reduction.

"During the quarter we continued to make progress on our merchandising strategy and inventory position," said Darrell Webb, chairman, president and ceo. "While our actions have resulted in a decline in same-store sales, we were able to realize significant gross margin improvement in the fourth quarter compared to the same period last year. Our strategic plan is gaining traction, evidenced by the expansion in margins, improvement in earnings and debt reduction, as we shift our focus to achieving profitable sales.”

Net earnings for the fourth quarter were $25.8 million, compared with a net loss of $18.0 million in the prior year fourth quarter. Sales were down 0.5% to $600.8 million from $604.1 million last year.

Net loss for the year was $1.9 million, compared with a net loss of $23.0 million for the previous year. Net sales for the fiscal year ended Feb. 3, 2007 decreased 1.7% to $1.85 billion from $1.88 billion a year ago.

And perhaps the best news for the 801-store fabric and crafts retailer: gross margins for the fourth quarter increased 310 basis points to 45.0% from 41.9% due to “a less promotional pricing strategy, better sell-through on seasonal goods and reduced sales of clearance inventory.”

Selling, general and administrative (SG&A) were tamped down to $215.4 million, or 35.9% of net sales, from $218.0 million, or 36.1% of net sales, in the prior year fourth quarter. Operating profit for the fourth quarter was $42.3 million, versus an $8.9 million operating loss for the prior year fourth quarter.

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