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Jo-Ann plumps up 3Q profits

In spite of an increase in expenses, Jo-Ann Stores Inc. posted a strongly improved third quarter. The fabric and crafts chain pushed its net income up by nearly 35 percent in the quarter, to $12 million.

The company was able to boost its profitability through a 220-basis point improvement in its average gross margin, along with a 4 percent uptick in its sales for the quarter. Sales for the quarter reached $447.5 million, and average gross margin was 48.1 percent. Same-store sales rose 4.2 percent.

Alan Rosskamm, chairman and ceo, said improved gross margin rates were create by less aggressive promotional pricing and less clearance activity than last year.

That better gross margin overcame the effects of a 110-basis point increase in Jo-Ann's selling, general and administrative expenses as a percentage of sales, which reached 39.6% in the third quarter. In dollars, SG&A rose by almost 7%, to $177 million. The retailer attributed this rise primarily to a promotion to mark its 60th anniversary sale, along with higher distribution costs due to changes in the management of seasonal merchandise distribution.

The company isn't expecting the same strong performance for the fourth quarter. Same-store sales are expected to increase by only 2 percent to 3 percent. Fourth-quarter earnings are expected to be flat to slightly down to last year.

Jo-Ann Stores Inc.

Qtr. 10/31 (x000) 2003 2002 % chg
Sales $447,500 $430,100 4.0
Operating income 38,100 31,700 20.2
Net income 12,000 8,900 34.8
Earnings per share 0.54 0.40 35.0
Average gross margin 48.1% 45.9%
SG&A percentage 39.6% 38.5%
Nine months 2003 2002 % chg
Sales 1,181,500 1,156,200 2.2
Operating income 80,000 83,700 -4.4
Net income 13,900 9,600 44.8
Earnings per share 0.63 0.91 -30.8
Average gross margin 48.1% 47.6%
SG&A percentage 41.3% 40.3%


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