Highlights from Jo-Ann Stores (JAS) Q1 Conference Call: Q1 Marked Strongest Jump in Traffic in 7 Qtrs.

May 28, 2009 3:33 PM EDT

Jo-Ann Stores (NYSE: JAS) reported its Q1 results last night, beating the Street's EPS estimate by nearly 20 cents. Despite the solid earnings beat, shares of Jo-Ann are relatively flat today, most recently trading at $21.61.

Traders may be focusing on Jo-Ann's FY10 EPS guidance, which came in below analysts expectations.

Below are some highlights from the retailers Q1 conference call:

• sales in the Sewing segment rose 2.6%, while sales in the Non-Sewing division fell 0.8%. Quilting continued to be the growth leader in Sewing, while yarn, kid's crafts and food crafting remained strong in the Non-Sewing unit.
  
• Jo-Ann's Sewing business accounted for 52% of Q1 sales volume, while, obviously, the Non-Sewing business made up 48%.
  
• Weakness in seasonal products and higher ticket items including custom framing partially offset the strong category sales.
  
• transactions rose 3.3% during Q1, marking the strongest increase in customer traffic in 7 quarters.
  
• management suggested that store remodels have continued to benefit sales trends, attributing an average of 8% increase in sales from remodels. Completed 29 remodels last year and expect to complete about 30 more this year.
  
• Darrell Web, Jo-Ann's Chairman, President and CEO, said, "Beyond store remodels and optimizations, we are seeing strong sales from new products. For example, our new spring collection and apparel fabric and our new kids craft summer activity program are performing very well. Selectively, our work to remodel and optimize stores and to provide compelling new productassortments is helping Jo-Ann stores deliver sales growth in this challenging economy.
  
• gross margin during the quarter rose 210 basis points to 48.5%. The increase in gross margin rate was primarily due to reduced product costs from global sourcing, lower clearance levels and reduced freight costs.
  
• same store sales rose 1%, driven by higher customer traffic, partially offset by a lower average ticket.
  
• Large-format stores accounted for 53.1% of total Q1 sales, small-format stores accounted for 44.9% and Internet sales through joann.com accounted for the remaining 2% of sales.
  
• opened 12 stores and closed 13 compared to Q1 last year, when Jo-Ann didn't open any stores and closed 2. For FY09, sees opening about 20 new stores.
  
• ended the quarter with $85 million in cash, compared to $57.9 million at the end of the same quarter last year.

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