- Joann finished Q3 with a net sales decline of 4.1% from a year ago to $539.8 million, with comparable sales also decreasing 4.1%. The craft retailer said in a Monday earnings announcement it posted a net loss of $21.6 million versus $17.5 million year over year. But e-commerce sales increased at a rate of 11.5% versus last year, accounting for 13.1% of the company’s total sales in Q3.
- The retailer’s gross profit was $282.1 million was nearly flat compared to last year, while gross margin was 52.3%, an increase of 240 basis points year over year for the quarter ended Oct. 28. Joann reported total inventory declined 9% from a year ago.
- Joann raised its full-year top-line outlook and maintained its bottom-line outlook. The company now expects net sales relative to fiscal year 2023 to fall between 1% and 2% compared to a prior outlook of a 1% to 3% decline.
Joann faces $1.14 billion in long-term debt and is working to improve its cash flow. The company had previously identified $200 million in cost savings across its supply chain, product, and SG&A expenses.
Analysts with Telsey Advisory Group, led by Cristina Fernández, said in a note that free cash flow is a key area of focus given the company’s heavy debt load. Joann reported free cash flow fell $38.1 million versus a year ago.
While Joann saw a topline sales momentum gain following Black Friday, “one seasonal push may not necessarily be enough to save the retailer that has been cash-strapped for some time and suffocating under the weight of its debt,”said Ragini Bhalla, Creditsafe’s head of brand and spokesperson.
However, the cost-cutting initiatives appear to be working. Joann has raised its cost savings target to $225 million, Chief Financial Officer Scott Sekella said during a Monday earnings call, according to a transcript. Sekella and Chris DiTullio, the company’s chief customer officer, are simultaneously serving as interim CEO following the retirement of CEO Wade Miquelon in May.
By focusing on operational fundamentals, DiTullio said Joann was able to stabilize its business during Q3 despite the continually challenging retail environment, where consumers remain reticent to make discretionary purchases.
The company is now continuing to realign costs to its current revenue base, which DiTullio said has stabilized at pre-pandemic levels. DiTullio acknowledged that part of the company’s efforts involved laying off an undisclosed number of workers during Q3.
DiTullio also told investors and analysts that Joann was pleased with its Black Friday and Cyber Monday performance while at the same time acknowledging “we have many important selling days ahead of us for the holiday season.” Like other retailers, Joann extended its Black Friday and Cyber Monday events over several days.
“Our holiday floral and holiday decor assortments are resonating, and we are tracking to achieve our plans in these important categories. Broadly, the categories we saw success within Q3 have continued to be strong in the early stages of Q4,” DiTullio said.
At the same time, the retailer is experiencing basket pressures via fewer items per transaction and customers shopping closer to project needs (vs. stocking up),” Wells Fargo analysts David Lantz and Zachary Fadem said in a note. “Additional cost savings and the prospects of stabilizing trends are positives, but liquidity concerns and macro uncertainty remain,” they said.