Shares of specialty craft goods retailer JOANN (JOAN 0.89%) rose a quick 16% as trading got underway on Friday. Investors were clearly pleased with the company's earnings update, which was released after the market closed on Thursday. It was the retailer's second quarterly report since its March IPO, and that factor adds some complications here.
Private-equity firm Leonard Green & Partners took JOANN private about a decade ago, but early this year, the firm decided to return the niche retailer to the public markets. Given the pandemic, this might seem like a bad time to undertake such a move. However, crafts and craft supplies have been in high demand as the coronavirus kept people at home more than normal. Notably, the company's full-year fiscal 2021 sales were up 23% year over year when it reported them on April 1, just a few weeks after its IPO. While that was a nice result to see, JOANN's fiscal year ends in January, so it wasn't a public company through any of that period. But, as Thursday's earnings update showed, the strength carried over into the first quarter of its fiscal 2022, when revenues rose by 15% year over year.
Although that represented a slowdown in top-line growth, it was still a solid number, especially given that, with the rollout of vaccines and the reopening of the U.S. economy, people have more options about how to spend their free time again. It seems that for many people, the love of crafting that was kindled or rekindled during the pandemic is persisting.
That said, the really uplifting number in Thursday's report was on the bottom line, where JOANN reported adjusted earnings of $0.46 per share, up from a loss of $0.31 in the prior-year quarter. Again, however, it's necessary to note that the company wasn't public in the first quarter of fiscal 2021, and was only public for a few weeks of the just-reported fiscal quarter, so this comparison comes with some issues and caveats. Still, analysts had been looking for JOANN to report earnings of just $0.18 per share.
All in all, not only did the niche retailer demonstrate continued sales strength, it also soundly beat Wall Street's expectations. It's easy to see why investors were pleased.
While there was definitely good news in JOANN's earnings release, investors should probably take the numbers with a grain of salt. The current retail environment is a strange one, and JOANN is still months away from reporting on its first full quarter as a public company. In other words, there are a lot of moving parts here. And, including Friday's early gains, the shares are up by around 33% since their IPO just about three months ago, pricing in a material amount of good news in a very short period of time. More conservative investors might want to wait for some further earnings updates before deciding whether or not to buy this stock.