Hancock Fabrics’ sales up, but still records net loss

BALDWYN — Hancock Fabrics Inc., for its first quarter ended April 28, reports an operating loss of $1.2 million, compared to a $1.0 million loss in the first quarter of last year.

The net loss was $2.4 million, or $0.12 per basic share, compared to a net loss of $2.2 million, or $0.11 per basic share, in the first quarter of fiscal 2011.

Adjusted EBITDA totaled $207,000, compared to $552,000 for the first quarter of fiscal 2011.

Net sales for the quarter increased 3.5 percent on a comparable basis to $63.9 million, compared to $62.0 million for first quarter of last year. This is an almost five percentage point improvement over the previous year comparable sales decrease of 1.3 percent.

At quarter end, the company had outstanding borrowings under its revolving line of credit of $35.5 million and outstanding letters of credit of $6.3 million. Additional amounts available to borrow under its revolving line of credit at the end of the quarter were $28.4 million. The balance of the company’s subordinated debt was $21.6 million at quarter end, and the unamortized warrant discount on this debt was $2.9 million.

Steve Morgan, Hancock Fabrics president and CEO, said, “Sales continue to ramp as we move into June, with seven months of positive comparables in a row. This is the first time that Hancock has achieved a continuous sales increase for that period of time since 2003.

“The first quarter expenses, as committed, were reduced by over $900,000 compared to last year’s first quarter, and point of sale gross margin dollars provide a $905,585 increase over last year’s first quarter – even though our increased promotional activity driven by competitive pressures decreased the point of sale gross margin rate slightly. Inventories are extremely clean and initiatives put into place over the past 8 months continue to contribute to these positive comparables. We feel optimistic about the remainder of the year.”

During the quarter, the company relocated two units, ending the quarter with 263 stores.

 

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