The locally based fabric and crafts retailer, which reported net income of $4.2 million, or 18 cents per diluted share in the prior year, said higher markdowns also narrowed gross margins during the quarter ending April 29. That figure declined from 48.7% in the prior year to 46.6% of net sales in the current quarter.
"Sales have been challenging across the entire industry," said Alan Rosskamm, the company's chairman and chief executive officer. He also noted that for the first time in recent memory, all four fabric and craft retailers reported negative first-quarter numbers.
Rosskamm said fixed costs associated with the opening of new superstores and the start up expenses associated with the opening of its Opelika, AL distribution center also cut into profits. Despite those numbers, Rosskamm said the firm continues to make progress to reduce inventory, control expenses and improve its merchandise selections. Debt levels have been reduced and a remerchandising effort has been implemented, he said. Although the company said it expects "a significant loss" during the second quarter as the firm retools its merchandising efforts, Rosskamm noted that by the fourth quarter "we hope to demonstrate real progress in the bottom line."
The company, which operates 851 stores in 47 states, said net sales for the quarter increased slightly to $424.7 million, rising 1% from $420.7 million in the prior year while sales at its stores open at least a year fell 3%, compared to a same-store sales increase of 0.6% in the first quarter of 2006.
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