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Hancock Fabrics posts loss for quarter, year

BALDWYN — Hancock Fabrics Inc. has announced financial results for its 2010 fiscal year and fourth quarter ended Jan. 29, 2011.

Net sales for the year were $275.5 million, compared with $274.1 million in the previous year, and comparable store sales were flat over the last two years.

Operating income for the year was a loss of $5 million, a decrease of $12.7 million from the previous year. Excluding one-time charges incurred in the fourth quarter totaling $9.5 million, operating income for the year was $4.5 million, a decrease of $3.2 million from the previous year. One-time items included a $6.7-million charge for inventory obsolescence, a $1.5-million charge for asset impairment and $1.3 million of severance-related costs associated with the CEO transition.

Adjusted EBITDA, which excludes the one-time items described above, totaled $11 million, a decrease of $3.3 million over fiscal 2009.

Net sales for the quarter were $78.4 million, compared with $77.7 million in the fourth quarter last year, and comparable same store sales increased 0.7 percent, compared with a 1.3 percent decrease in the previous year.

Operating income for the quarter was a loss of $8.4 million, a decrease of $11.7 million compared to a $3.3-million profit in the previous year’s fourth quarter. Excluding the one-time charges totaling $9.5 million in the current quarter, operating income was $1.1 million, a decrease of $2.2 million versus the fourth quarter of fiscal 2009.

Adjusted EBITDA for the quarter was $2.7 million, a decrease of $2.4 million over the same period last fiscal year.

Steven R. Morgan, interim president and CEO since February, said, “We incurred significant one-time non-cash charges in the fourth quarter as we took actions to improve our business. The most significant charge was related to anticipated markdowns on aged products. These markdowns have been implemented, and will allow us the scope to liquidate these aged goods quicker as we move forward and ensure we have current, relevant merchandise for our customers. I am confident that we have identified, segregated, properly priced and positioned this product to provide a great value to our customers and to better position ourselves for new products in the remainder of the year.

“This business has significant opportunity and a solid foundation is in place for its growth. The short term will be challenging as we focus on improving certain areas – specifically store presentation, refinement of craft business and improvement to our replenishment process.”

Source: Hancock Fabrics Inc.

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