Hancock profits healthy in 4Q

By Don Hogsett -- Home Textiles Today, 3/5/2001

TUPELO, MI -Widening margins and whittling down its interest costs, Hancock Fabrics Inc. pushed fourth-quarter profits up an impressive 27 percent, to $5.0 million from $4.0 million last year, despite a slowdown in sales and widespread economic weakness.

Sales fell off by 2.1 percent, to $101.2 million from $103.4 million, hobbled by weather-related store closings in December and a broad slowdown in Christmas spending, said Larry Kirk, ceo.

Driving the bottom line improvement, Hancock boosted gross margins by 390 basis points, to 53.2 percent from 49.3 percent the prior year. Gross margin dollars improved by 5.7 percent, despite the stalled-out sales, rising by 5.7 percent, to $53.9 million from $50.9 million a year ago.

"With the general economic slowdown in the last six months and unusually deep discounting in fabric retailing, we chose to promote the value in our products and not to sacrifice pricing in what we believed, in the prevailing environment, would be an unproductive attempt to buy sales," Kirk explained. "Gross profit benefited from new product additions, ongoing reallocation of our merchandise mix and continued close attention to routine obsolescence. In fact, comparable store inventories were again lower than the prior year."

In another lift to the bottom line, interest expense was cut by 37.4 percent, to $416,000 from $665,000 last year.