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Jo-Ann Stores Sews Up A Niche
Jo-Ann Stores (NYSE:JAS) continues to be a solid business, but remains out of the sight of many investors. The company reported strong results for its fiscal 2011 third quarter, as it has carved a strong niche in the crafts retailing space. Its outlook once again affirms its growth prospects.
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A Company Doing Everything Right
We've written about Jo-Ann Stores before and how it honed its performance during the recession, strengthening its already powerful position in the crafts and fabric retailing space - and its good news continues. The company has remodeled stores and added new stores. It sells from both large and small format stores and from its website. So far, all of these avenues are successful.
The company posted strong profits again, this time earning $1.09 per diluted share compared to 90 cents last year's same quarter. Revenue rose from $509.1 million to $535.3 million. Large format store sales were $283.4 million, an increase of 3.7% with same store sales up 2.5%, while small format stores increased sales 6.7% to $242.3 million with same store sales increased by 6%. Same store sales increased by 4.1% overall, compared to a 4.3% increase in last year's third quarter. Gross margins and operating profit also improved.
The Dominant Player
On size alone, with its $1.25 billion market cap, Jo-Ann has become a relative juggernaut in the very small cap crafts space. Hancock Fabrics (OTC:HKFI) has a market cap of roughly $24 million, while A.C. Moore Arts & Crafts, Inc. (Nasdaq:ACMR) has a $57 million market cap. Michael's Stores are private, and the remainder of direct competitors are largely local or regional. This leaves multi-line retailers such as Sears Holdings (Nasdaq:SHLD) and JC Penney (NYSE:JCP), who provide some craft offerings, but in a much more diffuse way than Jo-Ann Stores.
With its combination of size and positioning in the marketplace, Jo-Ann has the advantage of scale over most of its direct competitors, yet it also is nimble enough to adapt to conditions. It has shown this through its fine performance coming out of the recession and continuing on.
Raising The Outlook
For its bottom line, Jo-Ann Stores now forecasts EPS of $3.35 to $3.45 instead of the $3.20 to $3.35 range it forecast earlier. It sees same store sales rising 3.5% to 4% compared to its earlier announced range of 3% to 3.5%. The company also projects improvement in its gross margin.
More For Investors
Jo-Ann Stores has racked up impressive nine-month results so far for its fiscal year. Of note it has a cash balance of $112.4 million at the end of its third quarter compared to $97. 7 million last year's same quarter. It had $47.5 million in long term debt after Q3 last year but now has no outstanding debt. It has strong cash flow generation, and anticipates it will have $85 to $88 million free cash flow by the end of this fiscal year. The company has been buying back shares and will continue to open new stores.
Jo-Ann Stock
The company has strong fundamentals which give it good prospects going forward. The stock sells for a PE of around 14.5, with a forward multiple of 11.8. Although the stock price declined somewhat recently, enough investors have noticed the stock it to bid shares up near its 52-week high; one wonders where its stock price would go if it were even more widely followed. Still, for long-term value and growth investors, you'll have to wait for a pull back to get Jo-Ann stock at anything close to bargain prices. (Find out how this method can be applied strategically to increase profit. See Fundamental Analysis For Traders.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 8 Ways To Lose Money On Bonds
A Company Doing Everything Right
We've written about Jo-Ann Stores before and how it honed its performance during the recession, strengthening its already powerful position in the crafts and fabric retailing space - and its good news continues. The company has remodeled stores and added new stores. It sells from both large and small format stores and from its website. So far, all of these avenues are successful.
The company posted strong profits again, this time earning $1.09 per diluted share compared to 90 cents last year's same quarter. Revenue rose from $509.1 million to $535.3 million. Large format store sales were $283.4 million, an increase of 3.7% with same store sales up 2.5%, while small format stores increased sales 6.7% to $242.3 million with same store sales increased by 6%. Same store sales increased by 4.1% overall, compared to a 4.3% increase in last year's third quarter. Gross margins and operating profit also improved.
The Dominant Player
On size alone, with its $1.25 billion market cap, Jo-Ann has become a relative juggernaut in the very small cap crafts space. Hancock Fabrics (OTC:HKFI) has a market cap of roughly $24 million, while A.C. Moore Arts & Crafts, Inc. (Nasdaq:ACMR) has a $57 million market cap. Michael's Stores are private, and the remainder of direct competitors are largely local or regional. This leaves multi-line retailers such as Sears Holdings (Nasdaq:SHLD) and JC Penney (NYSE:JCP), who provide some craft offerings, but in a much more diffuse way than Jo-Ann Stores.
Raising The Outlook
For its bottom line, Jo-Ann Stores now forecasts EPS of $3.35 to $3.45 instead of the $3.20 to $3.35 range it forecast earlier. It sees same store sales rising 3.5% to 4% compared to its earlier announced range of 3% to 3.5%. The company also projects improvement in its gross margin.
More For Investors
Jo-Ann Stores has racked up impressive nine-month results so far for its fiscal year. Of note it has a cash balance of $112.4 million at the end of its third quarter compared to $97. 7 million last year's same quarter. It had $47.5 million in long term debt after Q3 last year but now has no outstanding debt. It has strong cash flow generation, and anticipates it will have $85 to $88 million free cash flow by the end of this fiscal year. The company has been buying back shares and will continue to open new stores.
Jo-Ann Stock
The company has strong fundamentals which give it good prospects going forward. The stock sells for a PE of around 14.5, with a forward multiple of 11.8. Although the stock price declined somewhat recently, enough investors have noticed the stock it to bid shares up near its 52-week high; one wonders where its stock price would go if it were even more widely followed. Still, for long-term value and growth investors, you'll have to wait for a pull back to get Jo-Ann stock at anything close to bargain prices. (Find out how this method can be applied strategically to increase profit. See Fundamental Analysis For Traders.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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