Jo-Ann takes slight loss in Q2
By Don Hogsett -- Home Textiles Today, 9/1/2003
HUDSON, OH — With costs climbing sharply higher due to rising payroll and distribution costs, and margins thinning out under markdown pressure, Jo-Ann Stores Inc., a fabric and crafts chain, recorded a $2.2 million loss, compared with a prior-year profit.
Taking another bite out of the bottom line was a $1.4 million, non-cash charge stemming from stock-based compensation expense, and $700,000 in costs pegged to a share reclassification proposal which will be voted on in November.
Sales increased by 1.6 percent, to $359.2 million from $353.7 million, with fewer stores. Same-store sales climbed by 2.4 percent vs. a 7.7 percent increase last year.
Putting earnings under pressure, costs climbed sharply higher, rising by 5.8 percent, or $8.7 million, to $158.8 million from $150.1 million last year. Measured as a percentage of sales, costs shot up by 180 basis points, or 1.8 percentage points. "Store payroll and distribution costs, as a percentage of sales, increased in the current quarter vs. the prior year, due to a planed acceleration of second-half seasonal product flow into stores. In addition, normal inflationary increases in these areas outpaced the overall sales growth rate," the company said.
Margins thinned by 40 basis points, or four-tenths of a percentage point, to 48.1 percent from 48.5 percent. "Lower selling margins due to accelerated clearance activity, were partially offset by an improvement in store shrink rates," the retailer reported.
| Qtr. 8/2 (x000) | 2003 | 2002 | % change |
| Sales | $359,200 | $353,700 | 1.6 |
| Oper. income (EBIT) | 13,800 | 21,500 | -35.8 |
| Net income | (2,200)a | 2,000a | — |
| Per share (diluted) | (0.11) | 0.10 | — |
| Average gross margin | 48.1% | 48.5% | — |
| SG&A expenses | 44.2% | 42.4% | — |
| Six months | |||
| Sales | 734,000 | 726,100 | 1.1 |
| Oper. income (EBIT) | 41,200 | 52,000 | -20.8 |
| Net income | 1,900b | 10,700b | -82.2 |
| Per share (diluted) | 0.09 | 0.53 | -83.0 |
| Average gross margin | 48.1% | 48.5% | — |
| SG&A expenses | 42.4% | 41.4% | — |
| (loss) a-Second-quarter results include $2.6 million in store opening and closing costs vs. $1.5 million last year; $1.4 million in stock-based compensation expense; and an income-tax credit of $1.3 million, compared with a prior-year tax provision of $1.3 million. Year-before results included $1.4 million in debt repurchase expenses. b-Six-month results include $4.7 million in store opening and closing costs, compared with $2.4 million during the same period a year ago; stock-based compensation expense of $2.6 million; and debt repurchase expenses of $3.4 million, compared with $1.4 million. |
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