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Hancock Fabrics Q2 earnings increase by $8.6 mn

27
Aug '09
Hancock Fabrics Inc announced financial results for its second quarter and first half of fiscal 2009.

Financial highlights for the second quarter include:

• Net sales for the quarter were $59.6 million compared with $63.8 million in the second quarter last year, and comparable sales decreased 4.2%, compared with a 10.8% increase in the previous year.
• Operating income for the quarter increased by $1.6 million as a result of a $0.7 million loss in this quarter compared to a $2.3 million loss in the previous year's second quarter.
• Net loss was $2.3 million, or $0.12 per share, in the second quarter of fiscal 2009, compared to a net loss of $10.9 million, or $0.57 per share in the second quarter of fiscal 2008.
• EBITDA for the quarter was $0.9 million, an increase of $1.5 million over the same period last fiscal year.
• Inventories have been reduced by $4.2 million since fiscal year end and $17.4 million compared to the same period last year.
• At quarter end, the Company had outstanding borrowings under its Revolver of $30.5 million and outstanding letters of credit of $6.5 million. The Note balance was $21.6 million and the warrant discount on the Notes was $9.3 million. Additional amounts available to borrow at that time were $30.9 million.

First half financial highlights include:

• Net sales for the first half were $123.7 million compared with $127.6 million in the first half of last year, and comparable sales decreased 0.9%, compared with a 3.3% increase in the previous year.
• Operating income for the first half increased by $4.4 million as a result of the $0.1 million loss in this first half compared to a $4.5 million loss in the previous year's first half.
• Net loss was $3.2 million, or $0.16 per share, in the first half of fiscal 2009, compared to a net loss of $16.2 million, or $0.85 per share in the first half of fiscal 2008.
• EBITDA for the first half was $3.1 million, an increase of $4.3 million over the same period last fiscal year.

Jane Aggers, President and Chief Executive Officer commented, “Despite a very challenging retail environment and lower revenue, our year over year results of operations have improved dramatically. This is the result of lowering our SG&A costs and improved management of the balance sheet. Since exiting from bankruptcy on August 1, 2008, we have paid down approximately $27.5 million of debt and pre-petition liabilities. As we further refine our internal planning and operational processes we are optimistic we can combine our cost reduction initiatives with a meaningful top line improvement.”

Gross margin for the second quarter of 45.8% was a 240 basis point improvement over the 43.4% of the prior year. This increase reflects a 200 basis point reduction in merchandise cost and a 60 basis point reduction in freight costs offset by reduced supply chain leverage as inventory levels have diminished from prior periods. For the first half, gross margin improved by 140 basis points to 45.5%. This improvement was driven by the same fundamentals that drove second quarter improvements.


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