Walmart probably sells a lot of craft and fabric materials too, but if so, its business isn't hurting Jo-Ann Stores (JAS). The retailer turned in a very strong quarter, with net income hitting $24.1 million, more than doubling the $10.2 million that came from the same year-ago period. Sales at stores open at least a year rose 4.3 percent, a sizable increase in this economy.
Darrell Webb, Jo-Ann's chairman, president and chief executive officer, said that Walmart might actually be helping his 759-store company build market share, in addition to the fact that smaller retailers in the sector aren't performing very well. "Walmart continues to remove fabric departments as they remodel stores, which is providing further opportunity to build share," he said during Jo-Ann's third-quarter conference call, as quoted by Home Textiles Today.
In an interview with Reuters last year, CFO James Kerr said Jo-Ann's advantage its ability to serve as a superstore for customers seeking fabric and craft materials. "We differentiate by having a more complete selling assortment, which we think gives us a competitive advantage," he said.
Management is trying to further capitalize on that advantage by increasing its number of large-format stores, which offer a wider variety of items and framing departments, while closing smaller units. So far this year, Jo-Ann opened 15 of the bigger locations and closed 23 smaller stores.
Jo-Ann might perserver in the face of Walmart, but it is not the only major player in the craft sector. Rival Michaels Stores (MIK) is larger, with just over 1,000 units, and though its most recent financial numbers aren't as impressive as Jo-Ann's, they're improving and solid. Michaels recorded a third-quarter net income of $15 million, up from a $20-million loss during the same year-ago period, and same-store sales rose 1.3 percent.
Despite that competition, retail analysts like Holy Guthrie of Boenning & Scattergood like what they see from Jo-Ann. In a report on its third quarter reiterating an outperform rating on the retailer, Guthrie wrote that she expects Jo-Ann to increase market share and said "sales growth is also expected to continue into the foreseeable future."