What happened
Shares of Joann (JOAN 11.65%), a craft store retailer, fell dramatically at the open of trading on June 3, losing as much as 17.5% in the first few minutes of the day. The drop was directly related to the company's first-quarter fiscal 2023 earnings release, which hit the Street after the close on June 2. The reading wasn't great.
So what
Joann reported first-quarter fiscal 2023 sales of $498 million, down 13.3% compared to the same quarter in fiscal 2022. Comparable-store sales declined a huge 12.9% year over year. To be fair, the fiscal first quarter of 2022 was a tough comparison, with comparable store sales up 15%, so some pullback was to be expected. Still, management noted during Joann's fiscal first-quarter 2023 earnings conference call that traffic was weak during the just-ended quarter, so there was more to the drop than just a tough comparison.
Image source: Getty Images.
Meanwhile, gross margin contracted 20% because of inflationary pressures. And Joann ended up losing $35.1 million during the quarter compared to a profit of $15.1 million in the fiscal first quarter of 2022. The company posted an adjusted loss of $0.22 per share compared to an adjusted profit of $0.46 a year ago. Wall Street had been expecting an adjusted profit of $0.07 per share. That's a big miss and investors tend to view such outcomes negatively.
Now what
The bad news didn't stop there. During the conference call, management noted that it had "previously been optimistic about the prospect of a return to positive one-year sales comparisons beginning in Q2," it now expects a high-single-digit sales decline in the second quarter. And then management provided a warning about the uncertainty in the current environment, essentially suggesting that things could be tough for a bit longer. No wonder investors took a glass-half-empty view of things this morning.
