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Comparable store sales drop at Hancock Fabrics
Jun '11
Hancock Fabrics Inc announced financial results for its first quarter ended April 30, 2011.

Financial summary for the first quarter include:

• Net sales for the quarter were $62.0 million compared to $63.1 million for the first quarter of last year. Comparable store sales decreased 1.3% compared to a 2.0% decrease in the first quarter of last year.
• Operating loss for the quarter was $1.0 million, compared to break-even for the previous year's first quarter.
• Adjusted EBITDA totaled $0.6 million, a decrease of $1.0 million over the first quarter of fiscal 2010.
• Net inventories have been reduced by $6.3 million compared to the same period last year, ending the quarter at $86.7 million.
• At quarter end, the Company had outstanding borrowings under its revolving line of credit of $12.6 million, which is a reduction of $1.1 million compared to the end of the first quarter of fiscal 2010. Additional amounts available to borrow under its revolving line of credit at the end of the quarter were $42.6 million. At quarter end, the balance of the Company's Floating Rate Secured Notes was unchanged at $21.6 million and the warrant discount on the Notes was $5.3 million.

Steven R. Morgan, Interim President and Chief Executive Officer commented, "Our first quarter results were impacted by the investment required to focus on the areas we outlined at the end of the fiscal year. We have made significant progress during the quarter in improving our store presentation, refining our craft business, refocusing our merchandise organization, and expanding our replenishment process. We have also undertaken the liquidation of our aged products. While these activities have come at an initial short term cost, we are positioning our organization for improved fall and winter seasons."

Operating Results

Gross margin for the quarter of 44.2% was a 30 basis point improvement compared to the 43.9% of the prior year's first quarter. This increase reflects a 120 basis point reduction in merchandise cost offset by a 20 basis point increase in freight costs and a 70 basis point increase in sourcing and warehousing.

Selling, general and administrative expenses for the quarter have increased by $0.7 million to $27.3 million (44.1% of sales) from $26.6 million (42.2% of sales) last year. Increases have been driven by additional investment in initiatives to improve our store standards in preparation for the second half of the year.

Store Openings, Closings and Remodels

During the quarter, the Company closed one store and ended the quarter with 264 stores.

Hancock Fabrics, Inc. is committed to being the inspirational authority in fabric and sewing, serving creative enthusiasts with a complete selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines. The Company currently operates 264 retail stores in 37 states and an Internet store.

Hancock Fabrics Inc

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