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Tickers in this Article: JAS, ACMR, BBBY, KSS, SHLD
Craft and fabric retailer Jo-Ann Stores (NYSE: JAS) produced strong third-quarter earnings, as the company continued to solidify its stronghold in its sector. Driven by brisk customer response, Jo-Ann Stores increased net income to 90 cents per diluted share from 40 cents per diluted share in last year's same quarter. The company's revenue increased by 6% in this year's third quarter from last year's, and the all-important same store-sales rose by 4.3%. Jo-Ann Stores blasted through this recession with its earnings.

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Winner in a Fragmented Space
Jo-Ann Stores occupy a unique retail space which has few public companies as direct competitors. The Michael's chain, which has gone private, is one of the few national chains, as the sector is actually made up of small local stores and chains, with up to 40% of crafts stores independent retailers, many of whom may be suffering cash flow woes. Jo-Ann's has not only a strong financial position, but favorable leasing situations, and further improved its cash position this quarter by reducing debt. The company continues to gain market share overall, and has a great opportunity to grow market share on the craft side particularly, where it has only 4% of the market as opposed to 20% of the fabric side.

A Small Competitor and Indirect Competition
AC Moore Arts & Crafts (Nasdaq: ACMR), a smaller crafts retailer with a market cap of $73 million, under one-tenth the size of Jo-Ann Stores' $873 million market cap, had a hard quarter, losing $12.9 million, with sales off by 9%. Its losses were wider than last year's same quarter. Other retailers feature crafts items or craft and fabric related items, such as larger retailers Bed Bath & Beyond (Nasdaq: BBBY), which sells some of the fabric-related items that crafters might buy, as does Kohl's (NYSE: KSS) and Sears Holdings' K Mart (Nasdaq: SHLD). These stores don't substantially cut into the fabric or craft item trade at Jo-Ann's, as Jo-Ann's serves the do-it-yourselfer, the crafter and sewer who, while they may also buy at department stores, discounters or home stores, also augments these buys with their own crafting.

Craft's Strong Niche
While many of the retailers had sluggish Black Friday sales - though longer term, places like Bed, Bath & Beyond are expected to continue doing very well - it's clear to see that while people en masse haven't reverted to sewing their own clothes or draperies, Jo-Ann Stores show that crafting remains a strong, resilient niche with powerful personal appeal and customer loyalty. Even other retailers who dabble in decorative knick-knacks or small crafted items for the home, along with standby staple crafting supplies such as tempera paints or poster board really point to the enduring appeal of these things, despite our high-tech society.

Jo-Ann Stores' Look Ahead
With positive guidance for the near term, the company is even hiring additional holiday workers, a bullish signal for them. Jo-Ann Stores projects further growth in same store sales and earnings per share going forward, and is even looking toward net store expansion as it remodels some, opens others and adds to its large store format, even while it continues to close some other, mostly smaller stores. The fabric of Jo-Ann Stores' future looks strong.

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