Arts-and-crafts retailer Jo-Ann Stores (NYSE:JAS) will report first-quarter 2007 financial results on Wednesday, May 30.
What analysts say:
- Buy, sell, or waffle? Darn it that the crafts sector can't generate analyst interest. All three analysts covering Jo-Ann stores say hold on to see what transpires with the company and industry.
- Revenues. Jo-Ann stores announced that revenues for the quarter were $500,000 less than last year's quarter, coming in at $424.2 million. That's below analyst expectations of $435 million. It was able to eke out a 1.8% increase in same-store sales, though.
- Earnings. Losses are expected to improve to $0.07 per share, a far cry better than the $0.32 per-share loss recorded last year.
What management says:
While its comps rose this year (even as sales fell), it really shouldn't have been that hard to achieve, considering that comps had declined nearly 4% last year. Getting customers to shop at crafts stores these days is no easy task. Rival A.C. Moore (NASDAQ:ACMR) reported a 5% drop in same-store sales a few weeks ago.
President and CEO Darrell Webb confidently claimed last quarter that Jo-Ann Stores' "strategic plan is gaining traction, evidenced by the expansion in margins, improvement in earnings and debt reduction, as we shift our focus to achieving profitable sales." The company is forecasting earnings growth double what analysts project for 2007, and it provided a nice boost to the stock when management announced results last quarter. Yet considering its sales effort this time out, the industry troubles that have plagued A.C. Moore, driven Hancock Fabrics and The Rag Shop into bankruptcy, and pushed Michael's into private hands might be more intractable than what Jo-Ann anticipates.
What management does:
Jo-Ann Stores wants to generate more profitable sales by thinning out its inventory. It's a tale of woe common to many of the stores in this segment. A.C. Moore had to go through a clearance bout itself. Jo-Ann is also trying to minimize its fire sales. That served it well in the fourth quarter and perhaps it will benefit from an earlier Easter this time around.
|
01/06 |
04/06 |
07/06 |
10/06 |
02/07 | |
|---|---|---|---|---|---|
|
Gross |
45.6% |
45.2% |
45.0% |
45.5% |
46.5% |
|
Operating |
1.6% |
0.6% |
(0.6%) |
0.2% |
1.4% |
|
Net |
(1.2%) |
(1.8%) |
(2.7%) |
(2.5%) |
(0.1%) |
One Fool says:
It's always more difficult to assess the valuation of a company struggling to be profitable. Fellow Fool contributor Toby Shute did a good job of estimating a forward valuation last quarter that showed it was quite expensive at these levels. If his estimates prove even in the ballpark, that would make it twice as rich as A.C. Moore, though neither company appears to present an exciting opportunity these days. While the hope for a turnaround finally knitting together made some investors exuberant, I'd be more cautious, waiting to make sure the promise of more profitable sales doesn't unravel.
Related Foolishness:
Jo-Ann Stores has earned a one-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the stock rating service by joining today. It's free!
Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
