Novice Investing - Jo-Ann Looks Crafty

Date: Monday 01st 2008f December 2008 03:54:43 PM

Jo-Ann Looks Crafty - 11/15/2005

By: Novice Investing Staff

Craft specialty retailer, Jo-Ann Stores Inc. (JAS) reported a 3rd quarter loss of $ 4.1 million or 18 cents per share. This missed analyst' estimate of 1 cents per share loss. Inventory markdown will continue to haunt gross margin for the coming quarter.

Things do not look pretty. But when things get ugly, we might have the potential for turnaround in our hand. Jo-Ann has consistently earned $ 40 Million or more for the previous three fiscal years. This is equivalent to $ 1.70 earning per share. Recently, Jo-Ann is traded at $ 12.00 which at first glance is a decent price.

However, balance sheet does not look that healthy at Jo-Ann. It has a negative net cash of $ 212.8 M, which is equivalent to $ 9.20 per share of net debt. With $ 1.70 EPS, it takes 5+ years of profitability to bring net debt to $ 0. That is too risky considering that the future is so uncertain.

Investors in the sector might want to look at competitors such as Michaels Stores Inc. (MIK) with $ 1.35 per share of positive net cash or AC Moore Art (ACMR) with $ 0 per share of positive net cash. Both are still expected to post a profit for the next fiscal year.

In the short run, it looks like Jo-Ann Store will be volatile. On November 15th after the close, one of its competitors, Hancock Fabrics Inc. (HKF), will report earning. If the stock can go a lot lower, it might be time to research Jo-Ann as a possible investment. Right now, it still looks expensive and risky considering its high debt level.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Jo-Ann Stores Inc. (JAS) or any other securities.

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