- Joann on Monday reported $562.8 million in Q3 net sales, a 7.9% decline. The crafts retailer swung to a $17.5 million loss from $22.8 million in net income during the same quarter last year.
- In an effort to improve its liquidity and balance sheet, Joann said it is suspending quarterly dividend payments “to increase liquidity and overall financial flexibility.”
- Scott Sekella, most recently vice president of corporate financial planning and analysis at Under Armour, joined the company as chief financial officer in September. Previously he served as VP and global controller at Crocs Inc., and as a finance supervisor at Ford Motor Co., according to a release from Joann and Sekella’s LinkedIn.
In a Monday earnings call, Joann’s CEO Wade Miquelon said that while Halloween was a third-quarter sales bright spot, “overall, we were disappointed.” Sales of Halloween items were up 8% in the quarter.
Partly in response, Joann aims to achieve $200 million in cost savings by fiscal 2025 by reducing supply chain, product, overhead and operating expenses.
“Increasingly, we're seeing that consumers are feeling the sting of inflation, but the recent shift in shopping behavior has skewed much more towards essentials and basics with less emphasis on discretionary purchases,” Miquelon said, according to an earnings call transcript from Seeking Alpha.
“These budget-conscious consumers have been under a prolonged period of stress for many months now, and they are getting more selective with their purchases,” said Miquelon. “Fortunately, there are some signs that these inflationary trends are beginning to slide even as we potentially head into something more typical of a recessionary environment in the short term.”
In April, Joann confirmed it spent $35.3 million on excess freight costs in the fourth quarter of 2021. At the time, Miquelon said those costs were a one-time occurrence and would “go away.”
Joann reported $1.06 billion in long-term debt as of October. Inventory was $747 million, nearly flat compared to last year. The company’s adjusted EBITDA contracted to $40.2 million compared to $72.6 million last year.
Miquelon said he is “cautiously optimistic” about Joann’s fourth quarter.
“As we are now in the midst of the holiday season and less than two weeks from Christmas, I have a high level of conviction that we have been doing the right things right with respect to what we can control in order to win the day with our customers,” Miquelon said.
Miquelon, who has led the company since 2019, also shared updates about two initiatives.
The first is a joint venture with sewing machine maker Singer that will introduce products and services that make the sewing pattern process easier and more accessible. The initiative was set to launch this year but will now launch in February during New York’s Fashion Week.
Miquelon said the company’s second initiative, a B2B marketplace named Inspiration Direct, exceeded internal revenue expectations. “We signed up over 200 new B2B customers in the third quarter and we have significant momentum with additional customers as well,” Miquelon said during the call. A commercial website for the platform is set to launch over the next two months.
“These initiatives, combined with our recent business momentum, give me optimism that we are on the right path as we transition from fiscal 2023 into fiscal 2024,” Miquelon said.
Neil Saunders, managing director at GlobalData, said in emailed comments that Joann’s debt creates two problems.
“First, the interest payments – while manageable – are damaging profit,” Saunders said. “This quarter, interest payments rose to $18.1 million from $11.8 million a year ago. Second, the high debt and balance sheet deficit gives Joann little room for maneuver.”
“This is one of the reasons why the company is now seeking to cut costs and has suspended its quarterly dividend. These moves are prudent, but they give the impression of a company in crisis,” Saunders said.
Ohio-based Joann has about 840 stores in 49 states. The company filed for a $100 million IPO in 2021. Going public generated about $131 million, according to Bloomberg.