Hancock same-stores up, debt down

TUPELO, MS — Boosting same-store sales and margins, and at the same time reducing debt to the level of zero, fabric and crafts retailer Hancock Fabrics Inc. drove first-quarter profits up by 50.4 percent, to $3.7 million from $2.5 million last year.

Sales increased by 6.6 percent, to $104.1 million from $97.6 million last year, as the chain opened five stores while closing seven others. More importantly, same-store sales shot up by 7.4 percent.

Fueling the bottom-line improvement, in addition to the stronger sales, average gross margin widened by 90 basis points, to 50.5 percent from 49.6 percent a year ago. At the same time, costs were rolled back by 40 basis points, to 43.5 percent from 43.9 percent in the year-ago quarter.

"Business was good throughout the entire quarter," said Larry Kirk, president. "Gross margins improved further as a result of changes and additions to the merchandise mix and a more effective marketing/advertising program. Inventories were 2 percent lower than a year ago, and the company had no debt outstanding during the quarter."

Wiping out its debt load, the retailer cut its interest expense by 84.9 percent, to $60,000 from $397,000 last year, generating a savings of $337,000.

The company managed to cut its operating costs, said Kirk, "although payroll costs, in particular, are being pressured by rising health insurance expense and by higher pension costs resulting from the two-year weakness in investment returns."

Kirk said, "The company's results are benefiting from the repositioning of our store base and the remerchandising of our product mix. We are attracting a broader base of customers without compromising our traditional sewing business. In the first quarter, the store-within-a-store concept in home decorating was installed in 19 existing stores and five new openings and will be added to more than 30 existing stores and all new openings in the second quarter."

At the same time, Kirk added, "new initiatives in the home accents, quilting and special occasion groups are also underway. We are pleased with the performance of the store model that is being developed and rolled out, and we are actively looking to expand it, both organically and in acquisitions of multiple retail spaces."