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Hancock Fabrics comparable store sales increases
02
Dec '10
Hancock Fabrics Inc announced financial results for its third quarter ended October 30, 2010, and first thirty-nine weeks of fiscal 2010.

Financial highlights for the third quarter include:

• Net sales for the quarter were $73.5 million compared to $72.7 million for third quarter of last year, and comparable store sales increased 0.3% compared to a 4.0% increase in the third quarter of fiscal 2009.
• Operating income for the quarter totaled $2.8 million compared to $4.5 million in the third quarter last year.
• Net income of $1.4 million, or $0.07 per basic share, in the third quarter of fiscal 2010 compared to net income of $3.0 million, or $0.16 per basic share, in the third quarter of fiscal 2009.
• Adjusted EBITDA was $4.5 million for the quarter or $1.6 million less than last year.
• At quarter end, the Company had outstanding borrowings under its revolving credit facility of $19.9 million, a decrease of $4.5 million from the previous quarter, and outstanding letters of credit of $8.7 million. Additional amounts available to borrow under its revolving credit facility at the end of the quarter were $49.8 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 $6.4 million.

First thirty-nine weeks financial highlights include:

• Net sales for the first thirty-nine weeks were $197.0 million compared to $196.4 million in the same period of last year, and comparable store sales decreased 0.3%, compared with a 0.9% increase in the same period of last year.
• Operating income for the first thirty-nine weeks was $3.4 million compared to $4.4 million of operating income in the previous year.
• Net loss was $0.7 million, or $0.04 per basic share, in the first thirty-nine weeks of fiscal 2010, compared to a net loss of $127,000, or $0.01 per basic share in the same period last year.
• Adjusted EBITDA decreased by $0.9 million for the first thirty-nine weeks of fiscal 2010, as compared to the prior year, to $8.3 million.

Operating Results
Gross margin for the quarter of 43.9% was a 260 basis point decrease over the 46.5% for the prior year. This decrease reflects a 200 basis point increase in merchandise costs, a 20 basis point increase in freight costs and a 40 basis point increase in sourcing and warehousing expenses.

For the first thirty-nine weeks, gross margin decreased by 70 basis points to 45.1%. This decrease consists of a 100 basis point increase in the cost of merchandise and a 10 basis point increase in freight costs partially offset by a 40 basis point reduction in sourcing and warehousing expenses.

Selling, general and administrative expenses for the quarter improved on a percentage basis to 38.5% of sales or $28.3 million from 38.8% of sales or $28.2 million in the prior year. For the first thirty-nine weeks of the year, these expenses have improved to 41.7% of sales or $82.1 million from 41.9% or $82.3 million in the first thirty-nine weeks of last year.

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