This summary is based on the second quarter fiscal 2009 earnings call conducted by Jo-Ann Stores Inc. (JAS) on August 27, 2008.
Management:
President, Chairman and CEO: Darrell Webb
EVP and CFO: James Kerr
Director of IR: Tim Ryan
Key Investor Issues:
- Quarterly net sales increased 3.7% to $403 million from the year ago quarter.
- Q2 operating loss was $16.5 million versus a $26.2 million operating loss in Q2 of 2008.
- Full year 2009 EPS are projected to be in the range 95 cents to $1.05.
Half Year Financial Highlights:
- Net sales were $849.1 million versus $422.1 million last year.
- The same store sales increase 3.9% versus a 4.2% increase for the same period in 2008.
- Large format stores net sales firmed 4.1% to $439.2 million from $422.1 million last year.
- The small format stores net sales for the six month period rose 1% to $394.6 million from $390.6 million in the previous year.
- The same store sales performance for small format stores advanced 5.2% versus a 2.7% increase in 2008.
Second-Quarter Financial Highlights:
The large format stores net sales for the quarter rose 3.1% to $209 million from $202.8 million last year.
- The same store sales for large format stores increased 2.3% versus an increase of 9.2% for the same period last year.
- The small format stores net sales for Q2 firmed 0.6% to $186.9 million from $185.7 million last year.
- The same store sales performance for small format stores increased 4.4% compared with an increase of 4.8% for Q2 in fiscal 2008.
The Q2 gross margins increased approximately 190 basis points to 47.6%.
- This compares with 45.7% in the second quarter of last year.
- The increase in gross margins is a result of lower sales clearance merchandise.
The SG&A expenses for the quarter increased to $191.6 million from $188.1 million last year.
- The SG&A expenses improved by about 90 basis points to 47.5% of net sales from 48.4% in Q2 of the prior year.
- The improvement was due to expense leverage from the increase in sales as well as continued cost control efforts.
- Year-to-date, store pre-opening and closing costs were up $200,000 to $5.3 million.
- The Q2 store pre-opening and closing costs include spending related to stores that will open and close in the third quarter.
The interest expense in the second quarter decreased by $500,000 due to lower average debt levels.
- During the second quarter, the debt levels improved form an average of $123 million outstanding in fiscal 2008 to an average of $100 million in fiscal 2009.
- The company ended the quarter at $472.6 million in inventory, a $35.3 million or 7% decrease versus a year ago.
- Basic inventories are relatively flat versus the second quarter last year with most of the reductions coming out of the clearance and fashion inventories.
The total borrowings were $100 million versus $159 million at the end of the second quarter last year.
- The company currently has approximately $285 million of excess availability under the senior bank credit facility.
- In addition, there is $41.2 million in cash on hand versus $16.7 million at the end of the second quarter last year.
- Year-to-date capital expenditures were $30.9 million net of landlord allowances of $2.8 million.
- Investment in IT and store related expenditures, including store remodels and new store openings represented the majority of the capital spending.
