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Hancock Fabrics earnings improve by $1.5 mn for Q2
26
Aug '10
Hancock Fabrics, Inc. announced financial results for its second quarter and first half of fiscal 2010.

Financial highlights for the second quarter include:

• Net sales for the quarter were $60.5 million compared to $59.6 million for second quarter of last year, comparable store sales increased 0.7% compared to a 4.2% decrease in the previous year.
• Operating income for the quarter increased by $1.3 million as a result of $0.6 million of operating income in the quarter compared to an operating loss of $0.7 million in the second quarter last year.
• Earnings per share improved by $0.08, or $1.5 million with a net loss of $0.8 million, or $0.04 per basic share, in the second quarter of 2010 compared to a loss of $2.3 million, or $0.12 per basic share in the second quarter of 2009.
• Adjusted EBITDA for the quarter increased $1.4 million or 157% to $2.2 million.
• At quarter end, the Company had outstanding borrowings under its revolving line of credit of $24.4 million and outstanding letters of credit of $8.2 million. Additional amounts available to borrow under its revolving line of credit at the end of the quarter were $38.2 million. The balance of the Company's subordinated debt was $21.6 million at quarter end, and the unamortized warrant discount on this debt was $7.0 million.

First half financial highlights include:

• Net sales for the first half were $123.6 million compared to $123.7 million in the first half of last year, and comparable store sales decreased 0.7%, compared with a 0.9% decrease in the previous year.
• Operating income for the first half increased by $0.7 million as a result of the $0.6 million of operating income compared to a $0.1 million operating loss in the previous year.
• Net loss was $2.1 million, or $0.10 per basic share, in the first half of 2010, compared to a net loss of $3.2 million, or $0.16 per basic share in the first half of 2009 - an improvement of $1.1 million or $0.06 per basic share.
• Adjusted EBITDA has increased by $0.7 million to $3.8 million in the first half of 2010 - a 24% increase over the same period in 2009.

Jane Aggers, President and Chief Executive Officer noted, "We are encouraged by the sales increase and resulting earnings improvement of the second quarter. We have accelerated the receipt of fall and holiday merchandise and continue to improve our operations in order to ensure we are prepared for the back half of the year. Our expectation is to maintain the momentum gained during the first half and we are looking forward to the third and fourth quarter."

Operating Results
Gross margin for the quarter of 47.7% was a 190 basis point increase over the 45.8% of the prior year. This increase reflects a 50 basis point decrease in merchandise costs and a 130 basis point improvement in sourcing and warehousing expenses.

For the first half, gross margin increased by 30 basis points to45.8%. This increase consists of a 50 basis point increase in the cost of merchandise and a 10 basis point increase in freight costs offset by a 90 basis point reduction in sourcing and warehousing expenses.

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