Shortly after posting results that indicate its turnaround efforts may be paying off, reports surfaced that Jo-Ann Stores
This is nothing new in the arts-and-crafts business, which has been struggling for some time now and has undergone major changes. A couple of craft sellers declared bankruptcy and Michaels was taken private. Fellow Fool Rich Duprey even wondered if A.C. Moore
In the first quarter, Jo-Ann got earnings closer to positive territory, posting a loss of $1.7 million, or $0.07 per share. That's a big improvement over the $6.6 million it lost in the year-ago period and in line with estimates. However, sales were down a thread in the quarter, slipping 0.1% to $424.2 million. Management was pleased to see positive comps for the first time in six quarters. However, gaining 1.8% after falling 3.9% in the first quarter last year doesn't impress me much, considering the easy comparison.
Elsewhere, margins improved while costs were lowered in the quarter. Jo-Ann is feeling confident about the remainder of the year as it expects comps to finish in positive territory for the year and sees continued improvement in margins. The company expects to finish the year with earnings of $0.55 to $0.65 per share.
How do you place a value on a company that has been consistently losing money, yet is reportedly about to be acquired? It's easy, you kindly reply: It's worth about $1 billion. Fair enough, but I still don't see a reason for investors to acquire Jo-Ann's shares, particularly after its stock price soared on the news yesterday. I expect the stock to slip back a bit once the euphoria cools off. While we wait to see how this deal unfolds, I'd recommend enjoying the show from a safe distance.
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