Operating income up at Hancock Fabrics in Q3
Hancock Fabrics Inc. announced financial results for its third quarter and first thirty-nine weeks of fiscal 2011.
Financial results for the third quarter include:
• Net sales for the quarter were $70.8 million compared to $73.5 million for third quarter of last year, and comparable store sales decreased 3.5% compared to a 0.3% increase in the previous year.
• Operating income for the quarter was $1.2 million compared to $2.8 million in the third quarter last year.
• Net income was effectively zero, or $0.00 per basic share, in the third quarter of fiscal 2011 compared to a net income of $1.4 million, or $0.07 per basic share in the third quarter of fiscal 2010.
• At quarter end, the Company had outstanding borrowings under its revolving line of credit of $34.9 million and outstanding letters of credit of $6.2 million. Additional amounts available to borrow under its revolving line of credit at the end of the quarter were $42.2 million. The balance of the Company's subordinate debt was $21.6 million at quarter end, and the unamortized warrant discount on this debt was $4.1 million.
First thirty-nine weeks financial results include:
• Net sales for the first thirty-nine weeks of 2011 were $190.6 million compared to $197.0 million in the first thirty-nine weeks of last year, and comparable store sales declined 3.0%, following a 0.3% decrease in the previous year.
• Operating loss for the first thirty-nine weeks was $2.5 million compared to $3.4 million of operating income in the previous year.
• Net loss was $6.1 million, or $0.31 per basic share, in the first thirty-nine weeks of fiscal 2011, compared to a net loss of $0.7 million, or $0.04 per basic share for the same period of fiscal 2010.
Steve Morgan, President and Chief Executive Officer commented, "Our third quarter continued to be difficult as previously predicted despite our efforts to remediate our inventory challenges created by missed buys in the 3rd and 4th quarters of 2010, which we now feel we have finally overcome. Notwithstanding our third quarter results, we are encouraged by the results of the fourth quarter and holiday season thus far.“
“Our comp store sales are up for the first 5 weeks of the fourth quarter and have trended similarly since Black Friday. November is the first month in over a year that we had an increase in same store sales. We will seek to continue this momentum through the fourth quarter and into next year now that the missed merchandise issues have been resolved."
Gross margin for the quarter declined by 40 basis points to 43.5% compared to 43.9% in the prior year. This is the result of increases of 100 basis points in merchandise costs and 40 basis points in freight costs offset by a 100 basis point decline in sourcing and warehousing expenses.
For the first thirty-nine weeks, gross margin decreased by 130 basis points to 43.8%. A 70 basis point increase in the cost of merchandise, a 50 basis point increase in freight costs and 10 basis points of additional sourcing and warehousing expenses drove this change.