Joann Inc. swung to a loss in its fourth quarter (and full year) even as the company reported sales that topped Street estimates.
In December, the sewing, arts and crafts retailer announced a $200 million annual cost reduction plan, with about halfof the reduction to come from supply chain savings.
“We have already initiated multiple actions to support the enhancement of our free cash flow and liquidity position including our Focus, Simplify and Grow cost reduction initiative which we expect will reduce annual costs by approximately $200 million,” stated president and CEO Wade Miquelon in Joann’s fourth-quarter earnings statement.
The company reported a fourth-quarter loss of $91.1 million, or $2.23 a share, for the quarter ended Jan. 28, compared to net income of $13.6 million, or $0.32 a share, in the year-ago period. Adjusted earnings were $0.7 a share, compared with $1.16 a share in the prior year. Analysts has expected earnings of $0.62 a share.
Net sales declined 5.8% to $692.8 million from $735.3 million, beating Street estimates of $668.8 million.
Total comparable sales fell 5.9%. E-Commerce sales were down 4.6% and accounted for 14% of revenue in the fourth quarter, a 20 basis point increase in the penetration rate over last year.
For the full year, net sales declined by 8.3% to $2.2 billion and total comparable sales declined by 8.1%. The retailer reported a net loss of $200.6 million, which includes $95.0 million of non-cash, pre-tax impairment, compared to net income of $56.7 million last year.
In his statement, Miquelon noted that, during the last year, the chain navigated a “challenging environment spanning macroeconomic uncertainty, unprecedented inflation, continued supply chain disruption, as well as lapping pandemic-fueled growth that positively impacted fiscal year 2022.”
“We gained topline sales momentum at the end of the fourth quarter, delivering positive monthly comparable sales in January 2023,” he said. “We also ended the year in an extremely clean inventory position with total inventory down 11% to last year and a clearance position of less than 5%.”
Earlier this month, Joann announced a new credit facility that adds a series of $100 million first-in last-out loans, adding to its existing $500 million asset-based revolving credit loan.
“While many of the cost headwinds we faced in fiscal year 2023 are becoming tailwinds, we believe it is prudent to continue to take proactive steps to strengthen our balance sheet,” said CFO Scott Sekella. “With this in mind, our new credit facility is another tool to improve our balance sheet as we focus on cash generation throughout fiscal year 2024.”
Joann operates 833 store locations across 49 states.