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Hancock continues its rebound with 3Q gains

TUPELO, MS -Continuing its strong rebound despite being hampered by a sluggish retail environment, Hancock Fabrics pushed third-quarter profits up by 22.7 percent, to $3.1 million from $2.5 million last year.

Despite softening sales, the fabric and crafts retailer parlayed stronger margins, lower costs and tight inventory controls into a substantially stronger bottom line. Reflecting steady improvements in operations, nine-month profits more than doubled, racing up by 105.0 percent, to $5.8 million from $2.8 million last year.

In a broadly weak retail climate, sales edged up by 0.9 percent, to $99.9 million during the third quarter from $99.0 million the preceding year.

"After a strong gain in August, comparable store sales slowed in September and October to finish only 1.2 percent higher than 1999's third quarter," said Larry Kirk, ceo. "However, all the major operating and financial measures went in the right direction to produce a 35 percent increase in earnings per share from the year-ago period. Sales and gross margins were higher while expenses, inventories and bank debt were lower."

Kirk added, "Results are continuing to benefit from the store repositioning and re-merchandising programs of the last three years. We have closed 200 small, low-potential stores, assimilated two key acquisitions, remodeled over 75 percent of our stores, completed interior and exterior signage conversions and made significant enhancements to our merchandise mix. As a result, asset productivity is increasing. The company is now doing more sales in fewer stores with considerably less inventory investment."

Going forward, said Kirk, "Unit growth is a priority for the company. We have the capacity to support considerably more stores with only minimal increases in general, administration and distribution costs. At the same time, we are aggressively expanding our store-within-a-store concept for home decorating in an alliance with Waverly, the premier brand in decorative fabrics. Currently, the concept is installed in 22 stores, and customer response has been very positive. In addition, the home accents product line that was added in mid-1999 is proving to be a very good complement to our home decorating strategy and will be developed further. In the coming year, the company's quilting presentation will also be enhanced. And added emphasis will be given to our special occasion category."

HANCOCK FABRICS INC.


Qtr. 10/29 (x000) 2000 1999 %CHG

Sales

$99,864

$98,962

0.9

Oper. income (EBIT)

5,375

4,623

16.3

Net income

3,066

2,499

22.7

Per share (diluted)

0.19

0.14

35.7

Average gross margin

50.6%

50.1%

-

SG & A expenses

43.9%

44.2%

-

NINE MONTHS

2000

1999

%CHG

Sales

284,033

278,175

2.1

Oper. income (EBIT)

10,986

6,209

76.9

Net income

5,831

2,844

105.0

Per share (diluted)

0.34

0.16

112.5

Average gross margin

50.0%

48.5%

-

SG & A expenses

44.7%

45.0%

-


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