Net sales at Hancock Fabrics registers decline of 4.6%

18 Apr '08

3 min read

Operating Results:
Gross margin for fiscal 2007 of 42.9% was an improvement over the 39.7% of the prior year. This increase reflects a 2% charge taken in 2006 related to consigned inventory and a LIFO credit in the current year.

The Company anticipates an improvement in gross margin rates going forward, resulting from sourcing, supply chain and inventory management initiatives implemented as a part of its restructuring effort.

Selling, general and administrative expenses for the year decreased to $117.8 million (42.6% of sales) from $141.3 million (48.8% of sales) in the prior year. This reduction occurred due to the closure of underperforming store locations, personnel reductions in the Corporate headquarters/distribution center, and various restructuring initiatives.

Store Openings, Closings and Remodels:
During 2007, the Company closed 134 stores and relocated 2 stores. These closures were part of the Company's restructuring efforts which included the liquidation of non-profitable locations.

The Company also remodeled 6 locations to its new prototype format. For 2008, the Company plans to remodel 89 existing store locations and relocate 12 stores, due to lease or market conditions.

Bankruptcy Proceedings:
• The Company has entered into a commitment letter, subject to bankruptcy court approval, with GE Commercial Finance to provide exit financing once the plan of reorganization is filed and approved.

• The Company intends to file a plan of reorganization in the near future and with court approval, exit bankruptcy thirty to sixty days later.

Hancock Fabrics Inc

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