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
o SECOND QUARTER EARNINGS OF $0.02 PER DILUTED SHARE VERSUS A NET LOSS OF
$0.10 PER SHARE IN THE PRIOR YEAR
o OPERATING MARGINS IMPROVE ON A 3.1% SAME-STORE SALES GAIN
o REPORTED EARNINGS INCLUDE A PRE-TAX GAIN OF $1.9 MILLION FROM A STORE
LEASE TERMINATION
HUDSON, OH - August 16, 2004 - Jo-Ann Stores, Inc. (NYSE: JAS) today announced
financial results for its fiscal 2005 second quarter ended July 31, 2004. Net
income for the quarter totaled $0.5 million, or $0.02 per diluted share,
compared with a net loss of $2.2 million, or $0.10 per share in fiscal 2004.
Review of Operating Results
Net sales for the second quarter increased 3.3% to $371.0 million from $359.2
million in the prior year. Same-store net sales increased 3.1% versus 2.4% for
the same period last year.
Operating profit for the second quarter was $4.6 million, or 1.2% of sales,
versus $0.7 million, or 0.2% of sales, in the prior year's second quarter.
Included in the current quarter's operating profit are net proceeds of $1.9
million pre-tax received by the Company related to an early termination of a
store lease at the request of the landlord. The income from this settlement
increased operating margins for the quarter by 50 basis points. The remaining
improvement in operating margin is attributable to a 90 basis point increase in
gross margin, to 49.0% of net sales versus 48.1% of net sales in the second
quarter of fiscal 2004. This increase was due primarily to a less promotional
pricing strategy that the Company began executing in the second half of fiscal
2004.
Alan Rosskamm, chairman and chief executive officer said, "We are pleased with
our financial performance for the second quarter, historically our weakest
quarter of the year. We have now achieved gross margin rate improvement while
maintaining positive same-store sales growth for four consecutive quarters."
The Company opened three superstores in the second quarter and an additional
five in the first two weeks of the third quarter, including the Company's 100th
superstore that opened last week.
Year-to-date, the Company has opened sixteen superstores and one traditional
store, and closed 46 traditional stores. For the balance of the year, the
Company expects to open 13 superstores and close 25 traditional stores.
Mr. Rosskamm continued, "We are well positioned for an exciting second half,
with our inventory levels and our merchandising strategies aligned as we head
into the important second half. We now have a total of 30 superstores that are
the smaller, more efficient 35,000 square foot prototype. Our superstores now
represent over 30% of total revenues and are expected to meaningfully contribute
to the second half sales performance."
Net sales for the six-months ended July 31, 2004 increased 5.7% to $775.9
million from $734.0 million in the prior year. Same-store sales increased 4.9%
for the six-month period versus a 2.5% same-store sales increase for the same
period in the prior year.
Operating profit for the six-month period was $19.6 million, a 59% increase
versus the $12.3 million in operating profit for the first half of the prior
year.
Fiscal 2005 Outlook
As a result of the second quarter performance, the Company is increasing its
expected earnings guidance for fiscal 2005 by $0.05 per diluted share, to $2.25
to $2.30 per diluted share.
Included in management's fiscal 2005 earnings guidance is approximately $8.5 to
$9.0 million for the pre-tax cost of expensing stock options, as well as other
equity compensation expense, which the Company reports separately in the
line-item "stock-based compensation expense" in the statement of operations.
Fiscal 2005 earnings guidance for the full year excludes the pre-tax charge of
$4.2 million recorded in the first quarter related to the Company's subordinated
debt refinancing.
For the third quarter, the Company is projecting an earnings performance of
$0.47 to $0.52 per diluted share versus last year's reported third quarter
earnings of $0.54. This is due to a special 60th Anniversary promotion that was
beneficial to last year's third quarter results which is not being repeated.
Same-store sales for the second half of the year are expected to increase
approximately 3% over last year.
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. 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 # 8495752.
Jo-Ann Stores, Inc. (http://www.joann.com), the leading national fabric and
craft retailer with locations in 47 states, operates 761 Jo-Ann Fabrics and
Crafts traditional stores and 102 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
------------------------------ ------------------------------
JULY 31, AUGUST 2, JULY 31, AUGUST 2,
2004 2003 2004 2003
------------ ------------ ------------ ------------
(Dollars in millions, except per share data)
Net sales $ 371.0 $ 359.2 $ 775.9 $ 734.0
Cost of sales 189.1 186.6 395.0 380.9
------------ ------------ ------------ ------------
Gross margin 181.9 172.6 380.9 353.1
Selling, general and administrative expenses 160.8 158.8 326.0 311.9
Store pre-opening and closing costs 4.6 2.6 7.5 4.7
Depreciation and amortization 9.9 8.9 19.6 17.9
Stock-based compensation expense 2.0 1.6 4.0 2.9
Debt repurchase expenses -- -- 4.2 3.4
------------ ------------ ------------ ------------
Operating profit 4.6 0.7 19.6 12.3
Interest expense, net 3.8 4.2 7.9 9.2
------------ ------------ ------------ ------------
Income (loss) before income taxes 0.8 (3.5) 11.7 3.1
Income tax provision (benefit) 0.3 (1.3) 4.5 1.2
------------ ------------ ------------ ------------
Net income (loss) $ 0.5 $ (2.2) $ 7.2 $ 1.9
============ ============ ============ ============
Net income (loss) per common share - basic $ 0.02 $ (0.10) $ 0.33 $ 0.09
------------ ------------ ------------ ------------
Net income (loss) per common share - diluted $ 0.02 $ (0.10) $ 0.32 $ 0.09
------------ ------------ ------------ ------------
Weighted average shares outstanding (in thousands)
Basic 22,149 21,552 21,976 21,400
============ ============ ============ ============
Diluted 22,877 21,552 22,771 21,856
============ ============ ============ ============
OTHER INFORMATION
Number of stores open at period end:
Traditional stores 766 826
Superstores 97 83
------------ ------------
863 909
============ ============
Square footage at period end (000's):
Traditional stores 11,130 11,851
Superstores 4,122 3,627
------------ ------------
15,252 15,478
============ ============
Average square footage per store:
Traditional stores 14,500 14,300
============ ============
Superstores 42,500 43,700
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- more -
JO-ANN STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
-----------------------
JULY 31, AUGUST 2, JANUARY 31,
2004 2003 2004
--------- --------- -----------
(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 17.7 $ 16.1 $ 17.4
Inventories 508.4 471.6 404.6
Deferred income taxes 24.6 27.9 25.0
Prepaid expenses and other current assets 19.9 18.7 23.5
-------- -------- --------
Total current assets 570.6 534.3 470.5
Property, equipment and leasehold improvements, net 204.5 190.4 203.2
Goodwill, net 26.5 26.5 26.5
Other assets 10.4 14.1 7.5
-------- -------- --------
Total assets $ 812.0 $ 765.3 $ 707.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 176.0 $ 172.3 $ 122.0
Accrued expenses 55.2 56.1 76.1
-------- -------- --------
Total current liabilities 231.2 228.4 198.1
Long-term debt 161.7 190.5 113.7
Deferred income taxes 39.4 37.2 39.4
Other long-term liabilities 12.3 9.8 10.3
Shareholders' equity 367.4 299.4 346.2
-------- -------- --------
Total liabilities and shareholders' equity $ 812.0 $ 765.3 $ 707.7
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