Who knew the arts-and-crafts set was made up of such fickle folk? According to A.C. Moore (NASDAQ:ACMR), the hot, dry weather of summer kept the crafters at home, or at least out of A.C. Moore's stores. As a result, the company said it would blow its earnings projections big-time for the third quarter of fiscal 2005. Instead of the $0.05 profit analysts had been expecting, A.C. Moore says it will report a loss of $0.10 to $0.12 a share.

While competitor Jo-Ann Stores (NYSE:JAS) reported a 0.2% increase in same-store sales increased 0.2% with sales rising 5% over last year, A.C. Moore said its comps dropped 4.3% for the quarter, even though sales rose 7% overall.

It's been a disappointing year for A.C. Moore shareholders. The stock price, which had been flying high at more than $33 a share as recently as early July, has been cut nearly in half since then.

Yet it's not completely unexpected. Back in April, I warned that even though the crafts store looked as pretty as a lace doily, it was an expensive stock, particularly when compared with industry leader Michaels (NYSE:MIK). A.C. Moore was selling at an enterprise value-to- owner's earnings ratio of 175 to Michael's 12, even though its earnings were 12 times less. Investors shrugged that warning off and bid the stock up another 20% to those July highs, but the constant drumbeat of flat or declining sales finally caught up.

All year long, management at A.C. Moore was predicting that it would post earnings of more than $1 a share, though it steadily reduced the range. Back in April, company executives said their company would earn as much as $1.09 per share, but they scaled that prediction back to no more than $1.03 per share by July. Now with the latest earnings warning, just for the company to break $1 in earnings for the year, it's going to have to post more than a 40% increase in earnings during the fourth quarter. As strong as the fourth quarter is for the arts-and-crafts industry -- the holidays apparently bring out the artistic side of shoppers -- there's just no way that's happening. In fact, investors can probably expect to experience some more pain. Just look at the recent trend in earnings growth -- or rather, the lack of it.

FY 05
Earnings Growth (Loss)

 FY 04
Earnings Growth (Loss)
Q1 0% 200%
Q2 (100%) (60%)
Q3 (200%) (16.7%)
Q4 * (4.1%)


It doesn't help matters that management keeps finding excuses for the lackluster performance. In the first quarter, it was the cold, snowy weather that hurt business. In the second quarter, it was because the company had "re-merchandised" its departments. Now it's due to the summer sun. You'd think A.C. Moore would realize by now that winters are cold and summers are hot.

Along with the retrenchment in share price, Moore's EV-OE ratio turned negative -- never a good sign -- while both Michaels and Jo-Ann Stores sit at 21. It also looks as though the company will fall just short of its goal to open 15% to 20% more stores each year for the next two years. A.C. Moore started 2005 with 96 stores; seven more opened in this quarter to bring the total up to 105, or just less than a 10% increase. If the company opens four more as planned, it will grow its base by 13% for the year, still short of the goal.

When you look at the performance and the promises from A.C. Moore so far this year, you realize there's just not enough hot glue, yarn, and rhinestones to make this company any prettier.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. The Motley Fool has a disclosure policy.