Gross Margin improves by 200 basis points at Jo-Ann
Jo-Ann Stores, Inc. announced financial results for its fiscal 2011 first quarter ended May 1, 2010. Net income for the first quarter was $18.2 million, or $0.66 per diluted share, compared with net income of $8.6 million, or $0.33 per diluted share, for the first quarter last year. The prior year first quarter net income includes a $0.7 million after-tax gain, or $0.03 per diluted share, related to the purchase of a portion of the company's senior subordinated notes. Excluding this gain, net income for the prior year first quarter was $7.9 million, or $0.30 per diluted share.
Net sales for the first quarter increased 4.4% to $480.3 million from $460.0 million for the same period last year. Same-store sales increased 4.1% compared with a 1.0% same-store sales increase for the first quarter last year.
Large-format store net sales for the quarter increased 3.9% to $257.2 million compared to the same period last year. Same-store sales for large-format stores increased 1.9% compared with a decrease of 0.6% in the first quarter last year. Small-format store net sales for the quarter increased 4.9% to $212.8 million compared to the same period last year. Same-store sales for small-format stores increased 6.9% compared with an increase of 3.0% in the first quarter last year. Joann.com Internet sales for the quarter increased 8.4% to $10.3 million compared to the same period last year.
Darrell Webb, chairman and chief executive officer stated, "Our team delivered record financial results in the first quarter of fiscal 2011. Sales remained strong, even as we began to cycle positive sales results from the previous year. Our seasonal merchandise and custom framing categories, which struggled through the recession, delivered positive sales trends for the first time in two years. I was also pleased with our continuing progress on global sourcing and inventory management which contributed to our gross margin improvement." Webb concluded, "We believe Jo-Ann Stores is positioned for sustainable sales and margin growth as we execute our strategic initiatives."
Gross margins for the first quarter increased approximately 200 basis points to 50.5% from 48.5% in the first quarter of the prior year due to global sourcing efforts, improved inventory management of seasonal and clearance merchandise, and promotional markdown optimization.
Selling, general and administrative expenses for the quarter increased 2.6% to $195.4 million from $190.4 million for the same period last year. Selling, general and administrative expenses as a percentage of net sales improved by approximately 70 basis points to 40.7% compared to the same period last year due to expense leverage from the increase in sales as well as continued efforts to control expenses.
Operating profit for the first quarter was $30.6 million versus $14.9 million for the same period last year.
The cash balance at the end of the first quarter increased $75.7 million to $160.7 million compared to the end of the first quarter last year. The company had no debt outstanding at the end of the first quarter which was a reduction of $50.5 million compared to the end of the first quarter last year. This $126.2 million improvement in cash, net of debt, was primarily the result of cash generated from operations and improvements in working capital.