Tough Q3 has Jo-Ann Looking to Holiday

Hudson, Ohio — Home textiles was one of the weakest categories, along with floral and finished seasonal goods, at Jo-Ann Stores Inc. during its disappointing third quarter, the company reported during its earnings call recently.

Home textiles experienced a mid-single-digit same-store sales decline, explained Alan Rosskamm, chairman and CEO.

“We experienced softness in home-related categories,” he explained. “For example, our fabric business overall was solid, but weak in home textiles. In addition, our floral business was below expectations.”

Halloween-related merchandise, he added, during the quarter had better sell-throughs and ended with fewer inventories versus last year's same period, “but it still did not meet expectations.”

Brian Carney, executive vice president and chief financial officer, elaborated by noting that the company's home decorating businesses were down 2 percent on a same-store sales basis, “although margin rates were up in these categories. Our toughest was finished seasonal, which was down 6.5 percent on a same-store sales basis.”

By comparison, fleece, scrap-booking and yarn — the three categories the company has invested in expanding most recently — demonstrated continued success during the period with “solid increases,” he said.

It is for this reason that Jo-Ann Stores is making a “huge investment” to “distort” or swell the size of these key categories at the expense of others, Carney said.

“We've increased our inventories in our core categories, while reducing our investments in the finished seasonal category,” he said, explaining that the hope is to adjust the size of seasonal business “to avoid heavy end-of-season markdowns and improve profitability.”

With the company being “reasonably optimistic” about the fourth quarter's holiday selling, Rosskamm said, Jo-Ann Stores is increasing its direct mail circulation and extending hours of operation at both superstores and traditional units in superstore markets during the peak selling weeks.

These temporary marketing initiatives are expected to help increase in-store traffic, which was also down during the third quarter.

“As we enter the fourth quarter — our most critical selling season — we're excited about our assortment in our core merchandise categories and our marketing support,” said Rosskamm, adding that now and into the future the company will try to improve its 35,000-square-foot superstore model, secure leases for new store openings and better its global sourcing capabilities. Jo-Ann Stores directly imports 30 percent of its purchases.

Finally, during the third quarter, the company opened 18 superstores and one traditional store and closed 24 traditional stores. For the balance of the year, the company expects to close seven traditional stores.

“We are confident that our focused merchandising strategies and marketing efforts will result in an improved fourth quarter,” Rosskamm said.