EXHIBIT 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACT: Brian Carney Investor Relations:
Executive Vice President, CFO Don Tomoff
Jo-Ann Stores, Inc Vice President, Finance
330-656-2600 Jo-Ann Stores, Inc.
http://www.joann.com 330-463-6815
JO-ANN STORES ANNOUNCES FINANCIAL RESULTS FOR THE
SECOND QUARTER OF FISCAL 2004
- SECOND QUARTER LOSS OF $0.11 PER DILUTED SHARE BETTER THAN CONSENSUS
ESTIMATES
- 11 NEW SUPERSTORES ADDED DURING THE FIRST HALF OF THE YEAR
HUDSON, OH, August 18, 2003--Jo-Ann Stores, Inc. (NYSE: JAS.A and JAS.B) today
announced financial results for its fiscal 2004 second quarter. Net loss for the
quarter totaled $2.2 million, or $0.11 per diluted share, compared with net
income of $2.0 million, or $0.10 per diluted share in fiscal 2003.
Second quarter financial results include a non-cash pre-tax charge for
stock-based compensation expense of $1.4 million as a result of the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 123 and $0.7 million of
costs associated with the Company's share reclassification proposal, currently
expected to be voted on in early November.
Net sales for the second quarter increased 1.6% to $359.2 million from $353.7
million in the prior year. Same-store sales increased 2.4% compared to a 7.7%
same-store sales increase for the same period in the prior year.
Review of Operating Results
Operating profit for the second quarter was $0.7 million, compared with an
operating profit of $9.9 million for the prior year's second quarter. Operating
profit in the current quarter includes the $2.1 million in charges highlighted
above, as well as $1.1 million in incremental store pre-opening and closing
costs.
Gross margins for the quarter decreased as a percentage of sales to 48.1% from
48.5% in the second quarter of last year. Lower selling margins, due to
accelerated clearance activity, were partially offset by an improvement in store
shrink rates.
Selling, general and administrative expenses, excluding other expenses
separately identified in the statement of operations, totaled $158.8 million for
the quarter, or 44.2% of sales versus
$150.1 million or 42.4% of sales last year. Store payroll and distribution
costs, as a percentage of sales, increased in the current quarter versus the
prior year, due to a planned acceleration of second-half seasonal product flow
into stores. In addition, normal inflationary increases in these areas outpaced
the overall sales growth rate.
Alan Rosskamm, chairman and chief executive officer commented, "In what is
historically our weakest quarter of the year, promotional and clearance efforts
helped us maintain positive same-store sales results, in spite of strong
same-store sales comparisons in the prior year. Accordingly, we have
significantly reduced the level of clearance merchandise we will carry into the
second half of the year. Despite accelerating the flow of second-half seasonal
goods into our stores, we ended the quarter with lower inventory than a year
ago, both on an absolute and a comparable store basis. We are well positioned
for an exciting second-half, beginning with our 60th anniversary sale later this
month."
Net sales for the six-months ended August 2, 2003 increased 1.1% to $734.0
million from $726.1 million in the prior year. Same-store sales increased 2.5%
for the six-month period, versus a 10.6% same-store sales increase for the same
period in the prior year.
Operating profit for the six-month period was $12.3 million, compared with $30.3
million for the same period in the prior year. Operating profit year-to-date
includes a total of $5.3 million in costs associated with: the Company's share
reclassification proposal, incremental costs related to the repurchase of
subordinated debt and the non-cash stock-based compensation expense of SFAS No.
123. In addition, the Company incurred $2.3 million in incremental store
pre-opening and closing costs.
In the second quarter, the Company opened six superstores and one larger
traditional store. Three superstores were opened in Texas, two in Florida and
one in Minnesota. The Company closed 15 traditional stores during the quarter.
Year-to-date, the Company has opened nine superstores and converted two larger
traditional stores to the superstore format, and opened two larger traditional
stores. The Company has closed 21 stores year-to-date.
For the remainder of the year, the Company expects to open eight stores, seven
of which will be superstores. Two additional traditional stores will be
converted to the superstore format. Approximately 20 to 25 traditional stores
are scheduled to close during the second-half of the year.
Mr. Rosskamm concluded, "We are excited about the new store openings in the
quarter. These stores represent our newly refined 35,000 square foot superstore
concept. While results are very preliminary, the customer feedback and sales
trends are very encouraging, and it will be exciting to watch these stores
contribute in the third and fourth quarters of this year."
Reclassification of Dual Class Shares
As the Company previously announced, it has filed a registration statement with
the Securities and Exchange Commission to register securities to be issued in
connection with a proposed reclassification of its two classes of common shares
into one voting class. The Company currently expects to hold a meeting of
shareholders in early November to vote on the reclassification proposal.
Fiscal 2004 Outlook
- The Company reiterates its expectations for fiscal 2004 earnings per
diluted share to be in the range of $2.00 to $2.10.
- For the second half, the Company expects earnings per share of
$1.90-$2.00, based on approximately 22.3 million diluted shares
outstanding, assuming the reclassification proposal is approved by
shareholders in November. The second half performance is expected to
be impacted by $2.6 million of stock based compensation expense and
approximately $1.0 million in additional costs related to the
reclassification proposal.
- As previously indicated, the Company expects to achieve earnings
improvement in the second half of the year. The rate of
improvement is expected to be greater in the third quarter.
Looking forward to fiscal 2005, the Company is targeting an earnings improvement
of 10-12%, after excluding the costs of both the share reclassification and debt
repurchases in fiscal 2004, totaling $5.0 million pretax. The Company expects to
accelerate the number of superstore openings in fiscal 2005 to 30 to 40 stores.
Conference Call on the Web
Investors will have the opportunity to listen to the second quarter earnings
conference call at 4:30 p.m. ET today. The call can be accessed via the Internet
through Streetevents at http://www.streetevents.com and on our Web site at
http://www.joann.com (go to the top of our home page and click on "About Jo-Ann
Stores," click on "Our Company" click on "Investor Relations," then click on the
Conference Call icon). To listen to the live call, please go to the Web site at
least 10 minutes before the call begins to register, download and install any
necessary audio software. For those who cannot listen to the live broadcast, a
replay will be available shortly after the call and will be archived until
August 26, 2003. The replay may be accessed at http://www.joann.com and at
http://www.streetevents.com or by phone at 800-642-1687, conference ID #1831932.
Jo-Ann Stores, Inc. (http://www.joann.com), the leading national fabric and
craft retailer with locations in 47 states, operates 826 Jo-Ann Fabrics and
Crafts traditional stores and 83 Jo-Ann superstores.
This press release contains forward-looking statements that are subject to
certain risks and uncertainties. Our actual results, performance or achievements
may materially differ from those expressed or implied in the forward-looking
statements. Risks and uncertainties that could cause or contribute to such
material differences include, but are not limited to, general economic
conditions, changes in customer demand, changes in trends in the fabric and
craft industry, seasonality, the availability of merchandise, changes in the
competitive pricing for products, the impact of our and our competitors store
openings and closings, fuel and energy costs, changes in tariff and freight
rates, consumer debt levels, and other capital market and geo-political
conditions. Other important factors that may cause actual results to differ
materially from those expressed in the forward-looking statements are discussed
in the Company's Securities and Exchange Commission filings.
(TABLES TO FOLLOW)
JO-ANN STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------ -----------------------
AUGUST 2, AUGUST 3, AUGUST 2, AUGUST 3,
2003 2002 2003 2002
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(Dollars in millions, except per share data)
Net sales $359.2 $353.7 $734.0 $726.1
Cost of sales 186.6 182.1 380.9 373.7
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Gross margin 172.6 171.6 353.1 352.4
Selling, general and administrative expenses 158.8 150.1 311.9 300.4
Store pre-opening and closing costs 2.6 1.5 4.7 2.4
Depreciation and amortization 9.1 8.7 18.2 17.9
Stock based compensation expense 1.4 -- 2.6 --
Debt repurchase expenses -- 1.4 3.4 1.4
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Operating profit 0.7 9.9 12.3 30.3
Interest expense 4.2 6.6 9.2 13.0
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Income (loss) before income taxes (3.5) 3.3 3.1 17.3
Income tax provision (benefit) (1.3) 1.3 1.2 6.6
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Net income (loss) ($2.2) $2.0 $1.9 $10.7
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Net income (loss) per common share - basic ($0.11) $0.11 $0.10 $0.57
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Net income (loss) per common share - diluted ($0.11) $0.10 $0.09 $0.53
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Average shares and equivalents outstanding (millions)
Basic 20.0 19.0 19.8 18.9
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Diluted 20.0 20.7 20.3 20.3
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OTHER INFORMATION
Number of stores open at period end:
Traditional stores 826 875
Superstores 83 70
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909 945
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Square footage at period end (000's):
Traditional stores 11,851 12,525
Superstores 3,627 3,214
------ ------
15,478 15,739
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Average square footage per store:
Traditional stores 14,300 14,300
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Superstores 43,700 45,900
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- more -
JO-ANN STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
-------------------------
AUGUST 2, AUGUST 3, FEBRUARY 1,
2003 2002 2003
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(Dollars in millions)
ASSETS
Current assets:
Cash and temporary cash investments $ 16.1 $ 15.7 $ 63.2
Inventories 471.6 496.2 363.1
Deferred taxes 27.9 30.6 28.2
Prepaid expenses and other current assets 18.7 14.5 17.2
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Total current assets 534.3 557.0 471.7
Property, equipment and leasehold improvements, net 190.4 200.1 190.3
Goodwill, net 26.5 26.5 26.5
Other assets 14.1 17.7 16.0
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Total assets $765.3 $801.3 $704.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $172.3 $162.9 $129.9
Other current liabilities 56.1 72.7 75.9
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Total current liabilities 228.4 235.6 205.8
Long-term debt 190.5 286.4 162.9
Deferred income taxes 37.2 23.6 37.2
Other long-term liabilities 9.8 8.7 9.2
Shareholders' equity 299.4 247.0 289.4
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Total liabilities and shareholders' equity $765.3 $801.3 $704.5
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