Hancock Fabrics reports ‘difficult’ third quarter

BALDWYN — Hancock Fabrics Inc. saw net sales for the third quarter of $70.8 million, compared to $73.5 million for third quarter of last year, and comparable store sales decreased 3.5 percent, compared to a 0.3 percent increase in the previous year.

Operating income for the quarter was $1.2 million, compared to $2.8 million in the third quarter last year.

Net income was effectively zero, or $0.00 per basic share, in the third quarter of fiscal 2011, compared to a net income of $1.4 million, or $0.07 per basic share in the third quarter of fiscal 2010.

At quarter end, the company had outstanding borrowings under its revolving line of credit of $34.9 million and outstanding letters of credit of $6.2 million. Additional amounts available to borrow under its revolving line of credit at the end of the quarter were $42.2 million. The balance of the company’s subordinate debt was $21.6 million at quarter end, and the unamortized warrant discount on this debt was $4.1 million.

For the first thirty-nine weeks net sales were $190.6 million, compared to $197.0 million in the first 39 weeks of last year, and comparable store sales declined 3.0 percent, following a 0.3 percent decrease in the previous year.

Operating loss for the first 39 weeks was $2.5 million, compared to $3.4 million of operating income in the previous year. The net loss was $6.1 million, or $0.31 per basic share, compared to a net loss of $0.7 million, or $0.04 per basic share, for the same period of fiscal 2010.

Steve Morgan, Hancock president and CEO said, “Our third quarter continued to be difficult as previously predicted despite our efforts to remediate our inventory challenges created by missed buys in the third and fourth quarters of 2010, which we now feel we have finally overcome. Notwithstanding our third quarter results, we are encouraged by the results of the fourth quarter and holiday season thus far. Our comp store sales are up for the first five weeks of the fourth quarter and have trended similarly since Black Friday. November is the first month in over a year that we had an increase in same store sales. We will seek to continue this momentum through the fourth quarter and into next year now that the missed merchandise issues have been resolved.”