JOANN Inc. (NASDAQ: JOAN) (“JOANN”), the nation’s category leader
in fabric and sewing with one of the largest assortments of arts
and crafts products, today reported results for its fourth quarter
and full year ended January 28, 2023.
JOANN’s President and Chief Executive Officer Wade Miquelon
commented, “In fiscal year 2023, we navigated a challenging
environment spanning macroeconomic uncertainty, unprecedented
inflation, continued supply chain disruption, as well as lapping
pandemic fueled growth that positively impacted fiscal year 2022.
We gained topline sales momentum at the end of the fourth quarter,
delivering positive monthly comparable sales in January 2023. We
also ended the year in an extremely clean inventory position with
total inventory down 11% to last year and a clearance position of
less than 5%.”
Miquelon concluded, “As we look to fiscal year 2024, our focus
is on cash generation while continuing to deliver a great customer
experience. We have already initiated multiple actions to support
the enhancement of our free cash flow and liquidity position
including our Focus, Simplify and Grow cost reduction initiative
which we expect will reduce annual costs by approximately $200
million. Based on these efforts, combined with the positive
momentum we saw in the fourth quarter, strong engagement with our
core enthusiasts in the early Spring selling season, and our
continued investments in strategic initiatives, we believe that
JOANN is well-positioned for fiscal year 2024.”
Scott Sekella, JOANN’s Chief Financial Officer added, “While
many of the cost headwinds we faced in fiscal year 2023 are
becoming tailwinds, we believe it is prudent to continue to take
proactive steps to strengthen our balance sheet. With this in mind,
our new credit facility is another tool to improve our balance
sheet as we focus on cash generation throughout fiscal year
2024.”
Fourth Quarter Highlights:
- Net sales declined by 5.8% compared
to the same period last year to $692.8 million with total
comparable sales decreasing 5.9%. E-Commerce sales declined at a
more moderate rate of 4.6% compared to last year and accounted for
14% of revenue in the fourth quarter, a 20 basis point increase in
the penetration rate over last year.
- Gross profit of $303.7 million on a
GAAP basis decreased by 6.4% compared to the fourth quarter of last
year. After adjusting for $16.7 million of excess import freight
costs, adjusted gross profit of $320.4 million declined 10.9%
compared to the same quarter last year.
- Gross margin was 43.8% on a GAAP
basis, a decrease of 30 basis points compared to the fourth quarter
last year. After adjusting for excess import freight costs, gross
margin of 46.2% declined by 270 basis points compared to the fourth
quarter last year.
- Selling, general and administrative
expenses increased by 3.1% from the same period last year.
- Net loss of $91.1 million, which
includes $95.0 million of non-cash, pre-tax impairment, compared to
net income of $13.6 million in the same quarter last year.
- Adjusted EBITDA of $48.6 million
compared to $88.9 million the same quarter last year.
Fiscal 2023 Full Year Financial and Business
Highlights:
- Net sales declined by 8.3% to $2.2
billion and total comparable sales declined by 8.1% compared to
last year.
- Gross profit of $1,040.3 million on
a GAAP basis declined by 14.2% compared to last year. After
adjusting for $91.2 million of excess import freight costs,
adjusted gross profit of $1,131.5 million declined 10.1% compared
to last year.
- Gross margin was 46.9% on a GAAP
basis, a decrease of 330 basis points compared to last year. After
adjusting for excess import freight costs, gross margin of 51.0%
declined by 110 basis points compared to last year.
- Selling, general and administrative
expenses increased by 3.9% from last year.
- Net loss of $200.6 million, which
includes $95.0 million of non-cash, pre-tax impairment, compared to
net income of $56.7 million last year.
- Adjusted EBITDA of $98.5 million
compared to $242.5 million last year.
- Added three million new customers to
our database of which approximately 75% were acquired through
digital channels. Our customer database has grown by 15 million
over the past three years.
Balance Sheet Highlights:
- Long-term debt, net was $976.0
million as of January 28, 2023 with cash and cash equivalents of
$20.2 million.
- Continued inventory receipt
reductions resulted in total inventory down 11% compared to fiscal
year 2022.
Recent Developments:
- On March 10, 2023, the Company entered into the Third Amendment
to the Amended and Restated Credit Agreement (dated October 21,
2016). The Third Amendment adds a series of first-in last-out loans
in an aggregate amount of $100 million, the full amount of which
was drawn on the closing date. This new credit facility is an
incremental facility to the existing $500 million asset based
revolving credit loan facility and bears interest at the Secured
Overnight Financing Rate (“SOFR”) plus 975 basis points, with one
100 basis point step-down.
Webcast and Conference Call Information: JOANN
management will host a conference call and webcast to discuss the
results today, Thursday, March 23, 2023 at 5:00 p.m. ET. The
toll-free number to call for the live interactive teleconference is
1 (844) 481-2750 and the international dial-in number is 1 (412)
317-0666. The live broadcast of JOANN’s conference call will be
available online at the Company's website, www.joann.com, under the
Investor Relations section, on March 23, 2023, beginning at 5:00
p.m. ET. The online replay will follow shortly after the call and
will be available for one year.
Table 1.JOANN
Inc. Consolidated Statements of Income
(Loss)(Unaudited)
|
Thirteen Weeks Ended |
|
|
Fifty-Two Weeks Ended |
|
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
January 30, 2021 |
|
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
January 30, 2021 |
|
|
(In millions except per share data) |
|
Net sales |
$ |
692.8 |
|
|
$ |
735.3 |
|
|
$ |
840.8 |
|
|
$ |
2,216.9 |
|
|
$ |
2,417.6 |
|
|
$ |
2,762.3 |
|
Cost of sales |
|
389.1 |
|
|
|
410.9 |
|
|
|
446.3 |
|
|
|
1,176.6 |
|
|
|
1,204.9 |
|
|
|
1,396.1 |
|
Gross profit |
|
303.7 |
|
|
|
324.4 |
|
|
|
394.5 |
|
|
|
1,040.3 |
|
|
|
1,212.7 |
|
|
|
1,366.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
286.9 |
|
|
|
278.4 |
|
|
|
313.8 |
|
|
|
1,073.5 |
|
|
|
1,032.9 |
|
|
|
1,132.0 |
|
Depreciation and
amortization |
|
20.5 |
|
|
|
20.0 |
|
|
|
20.2 |
|
|
|
80.4 |
|
|
|
80.1 |
|
|
|
80.0 |
|
Trade name impairment |
|
95.0 |
|
|
|
— |
|
|
|
— |
|
|
|
95.0 |
|
|
|
— |
|
|
|
— |
|
Operating profit (loss) |
|
(98.7 |
) |
|
|
26.0 |
|
|
|
60.5 |
|
|
|
(208.6 |
) |
|
|
99.7 |
|
|
|
154.2 |
|
Interest expense, net |
|
21.5 |
|
|
|
11.4 |
|
|
|
14.0 |
|
|
|
64.0 |
|
|
|
51.2 |
|
|
|
69.0 |
|
Debt related loss (gain) |
|
— |
|
|
|
0.3 |
|
|
|
(2.2 |
) |
|
|
— |
|
|
|
3.3 |
|
|
|
(155.1 |
) |
Investment remeasurement |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
|
|
— |
|
|
|
— |
|
(Gain) on sale leaseback |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
Income (loss) before income taxes |
|
(120.2 |
) |
|
|
14.3 |
|
|
|
48.7 |
|
|
|
(271.6 |
) |
|
|
69.7 |
|
|
|
240.3 |
|
Income tax provision
(benefit) |
|
(31.3 |
) |
|
|
0.7 |
|
|
|
10.4 |
|
|
|
(73.2 |
) |
|
|
13.0 |
|
|
|
28.0 |
|
Loss from equity method
investments |
|
2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
2.2 |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
$ |
(91.1 |
) |
|
$ |
13.6 |
|
|
$ |
38.3 |
|
|
$ |
(200.6 |
) |
|
$ |
56.7 |
|
|
$ |
212.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(2.23 |
) |
|
$ |
0.33 |
|
|
$ |
1.10 |
|
|
$ |
(4.93 |
) |
|
$ |
1.39 |
|
|
$ |
6.08 |
|
Diluted |
$ |
(2.23 |
) |
|
$ |
0.32 |
|
|
$ |
1.06 |
|
|
$ |
(4.93 |
) |
|
$ |
1.35 |
|
|
$ |
5.93 |
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
40.9 |
|
|
|
40.9 |
|
|
|
34.9 |
|
|
|
40.7 |
|
|
|
40.8 |
|
|
|
34.9 |
|
Diluted |
|
40.9 |
|
|
|
41.9 |
|
|
|
36.3 |
|
|
|
40.7 |
|
|
|
42.1 |
|
|
|
35.8 |
|
Table 2.JOANN
Inc. Consolidated Balance
Sheets(Unaudited)
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
(In millions) |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
20.2 |
|
|
$ |
22.5 |
|
Inventories |
|
584.1 |
|
|
|
658.6 |
|
Prepaid expenses and other current assets |
|
38.6 |
|
|
|
39.2 |
|
Total current assets |
|
642.9 |
|
|
|
720.3 |
|
|
|
|
|
|
|
Property, equipment and leasehold
improvements, net |
|
287.8 |
|
|
|
256.8 |
|
Operating lease assets |
|
778.4 |
|
|
|
818.0 |
|
Goodwill |
|
162.0 |
|
|
|
162.0 |
|
Intangible assets, net |
|
272.1 |
|
|
|
370.3 |
|
Other assets |
|
37.6 |
|
|
|
34.8 |
|
Total assets |
$ |
2,180.8 |
|
|
$ |
2,362.2 |
|
|
|
|
|
|
|
Liabilities and shareholders’
equity (deficit) |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
197.5 |
|
|
$ |
253.8 |
|
Accrued expenses |
|
119.2 |
|
|
|
142.4 |
|
Current portion of operating lease liabilities |
|
177.5 |
|
|
|
173.8 |
|
Current portion of long-term debt |
|
6.8 |
|
|
|
6.8 |
|
Total current liabilities |
|
501.0 |
|
|
|
576.8 |
|
|
|
|
|
|
|
Long-term debt, net |
|
976.0 |
|
|
|
778.6 |
|
Long-term operating lease
liabilities |
|
707.3 |
|
|
|
733.0 |
|
Deferred income taxes |
|
16.9 |
|
|
|
87.7 |
|
Other long-term liabilities |
|
28.7 |
|
|
|
36.3 |
|
|
|
|
|
|
|
Shareholders’ equity
(deficit): |
|
|
|
|
|
Common stock, stated value $0.01 per share |
|
0.4 |
|
|
|
0.4 |
|
Additional paid-in capital |
|
208.0 |
|
|
|
203.3 |
|
Retained deficit |
|
(239.2 |
) |
|
|
(24.9 |
) |
Accumulated other comprehensive income |
|
8.3 |
|
|
|
1.8 |
|
Treasury stock at cost |
|
(26.6 |
) |
|
|
(30.8 |
) |
Total shareholders’ equity
(deficit) |
|
(49.1 |
) |
|
|
149.8 |
|
Total liabilities and
shareholders’ equity (deficit) |
$ |
2,180.8 |
|
|
$ |
2,362.2 |
|
Table 3.JOANN
Inc. Consolidated Statements of Cash
Flows(Unaudited)
|
Fiscal Year Ended |
|
|
January 28,2023 |
|
|
January 29,2022 |
|
|
January 30,2021 |
|
|
(In millions) |
|
Net cash provided by (used for)
operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(200.6 |
) |
|
$ |
56.7 |
|
|
$ |
212.3 |
|
Adjustments to reconcile net
income (loss) to net cash provided by (used for) operating
activities: |
|
|
|
|
|
|
|
|
Non-cash operating lease expense |
|
171.5 |
|
|
|
162.6 |
|
|
|
152.4 |
|
Depreciation and amortization |
|
80.4 |
|
|
|
80.1 |
|
|
|
80.0 |
|
Deferred income taxes |
|
(73.0 |
) |
|
|
(0.4 |
) |
|
|
(3.9 |
) |
Stock-based compensation expense |
|
7.3 |
|
|
|
2.5 |
|
|
|
1.5 |
|
Amortization of deferred financing costs and original issue
discount |
|
2.0 |
|
|
|
2.5 |
|
|
|
3.7 |
|
Debt related loss (gain) |
|
— |
|
|
|
3.3 |
|
|
|
(155.1 |
) |
Investment remeasurement |
|
(1.0 |
) |
|
|
— |
|
|
|
— |
|
(Gain) on sale leaseback |
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
Loss on disposal and impairment of fixed assets |
|
1.7 |
|
|
|
0.9 |
|
|
|
3.4 |
|
Trade name impairment |
|
95.0 |
|
|
|
— |
|
|
|
— |
|
Loss from equity method investments |
|
2.2 |
|
|
|
— |
|
|
|
— |
|
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Decrease (increase) in inventories |
|
74.5 |
|
|
|
(102.7 |
) |
|
|
93.8 |
|
Decrease (increase) in prepaid expenses and other current
assets |
|
4.5 |
|
|
|
32.3 |
|
|
|
(22.5 |
) |
Increase (decrease) in accounts payable |
|
(56.3 |
) |
|
|
3.7 |
|
|
|
23.0 |
|
Increase (decrease) in accrued expenses |
|
(12.7 |
) |
|
|
(29.5 |
) |
|
|
62.0 |
|
(Decrease) in operating lease liabilities |
|
(153.9 |
) |
|
|
(190.4 |
) |
|
|
(130.8 |
) |
Increase (decrease) in other long-term liabilities |
|
(15.7 |
) |
|
|
(18.3 |
) |
|
|
9.4 |
|
Other, net |
|
(1.1 |
) |
|
|
(2.4 |
) |
|
|
(2.1 |
) |
Net cash provided by (used for)
operating activities |
|
(75.2 |
) |
|
|
(23.6 |
) |
|
|
327.1 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for)
investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(96.9 |
) |
|
|
(59.1 |
) |
|
|
(36.0 |
) |
Proceeds from sale leaseback |
|
— |
|
|
|
48.1 |
|
|
|
— |
|
Other investing activities |
|
(4.3 |
) |
|
|
(2.2 |
) |
|
|
0.3 |
|
Net cash (used for) investing
activities |
|
(101.2 |
) |
|
|
(13.2 |
) |
|
|
(35.7 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by (used for)
financing activities: |
|
|
|
|
|
|
|
|
Term loan proceeds, net of original issue discount |
|
— |
|
|
|
671.6 |
|
|
|
— |
|
Term loan payments |
|
(6.8 |
) |
|
|
(708.0 |
) |
|
|
(2.3 |
) |
Borrowings on revolving credit facility |
|
663.2 |
|
|
|
568.4 |
|
|
|
584.7 |
|
Payments on revolving credit facility |
|
(460.2 |
) |
|
|
(532.9 |
) |
|
|
(672.7 |
) |
Purchase and retirement of debt |
|
— |
|
|
|
(0.9 |
) |
|
|
(190.5 |
) |
Principal payments on finance lease obligations |
|
(10.3 |
) |
|
|
(7.7 |
) |
|
|
(3.4 |
) |
Issuance of common stock, net of underwriting commissions and
offering costs |
|
— |
|
|
|
76.9 |
|
|
|
— |
|
Purchase of common stock |
|
— |
|
|
|
(20.0 |
) |
|
|
— |
|
Proceeds from employee stock purchase plan and exercise of stock
options |
|
1.7 |
|
|
|
1.8 |
|
|
|
— |
|
Payments of taxes related to the net issuance of employee stock
rewards |
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
Dividends paid |
|
(13.4 |
) |
|
|
(12.6 |
) |
|
|
— |
|
Financing fees paid |
|
— |
|
|
|
(4.9 |
) |
|
|
(4.2 |
) |
Other, net |
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Net cash provided by (used for)
financing activities |
|
174.1 |
|
|
|
31.9 |
|
|
|
(288.4 |
) |
Net increase (decrease) in cash
and cash equivalents |
|
(2.3 |
) |
|
|
(4.9 |
) |
|
|
3.0 |
|
Cash and cash equivalents at
beginning of period |
|
22.5 |
|
|
|
27.4 |
|
|
|
24.4 |
|
Cash and cash equivalents at end
of period |
$ |
20.2 |
|
|
$ |
22.5 |
|
|
$ |
27.4 |
|
|
|
|
|
|
|
|
|
|
Cash paid during the period
for: |
|
|
|
|
|
|
|
|
Interest |
$ |
60.9 |
|
|
$ |
49.6 |
|
|
$ |
62.1 |
|
Income taxes, net of (refunds) |
|
(8.8 |
) |
|
|
4.2 |
|
|
|
55.2 |
|
Table 4.JOANN
Inc. Reconciliation of Net Income (Loss) to
Adjusted EBITDA(Unaudited)
|
Thirteen Weeks Ended |
|
|
Fifty-Two Weeks Ended |
|
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
January 30, 2021 |
|
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
January 30, 2021 |
|
|
(In millions) |
|
Net income (loss) |
$ |
(91.1 |
) |
|
$ |
13.6 |
|
|
$ |
38.3 |
|
|
$ |
(200.6 |
) |
|
$ |
56.7 |
|
|
$ |
212.3 |
|
Income tax provision
(benefit) |
|
(31.3 |
) |
|
|
0.7 |
|
|
|
10.4 |
|
|
|
(73.2 |
) |
|
|
13.0 |
|
|
|
28.0 |
|
Interest expense, net |
|
21.5 |
|
|
|
11.4 |
|
|
|
14.0 |
|
|
|
64.0 |
|
|
|
51.2 |
|
|
|
69.0 |
|
Depreciation and
amortization |
|
20.5 |
|
|
|
20.0 |
|
|
|
20.2 |
|
|
|
80.4 |
|
|
|
80.1 |
|
|
|
80.0 |
|
Other amortization (1) |
|
0.6 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
1.8 |
|
|
|
0.7 |
|
|
|
0.6 |
|
Debt related loss (gain)
(2) |
|
— |
|
|
|
0.3 |
|
|
|
(2.2 |
) |
|
|
— |
|
|
|
3.3 |
|
|
|
(155.1 |
) |
Investment remeasurement
(3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
|
|
— |
|
|
|
— |
|
(Gain) on sale leaseback
(4) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
Excess import freight costs
(5) |
|
16.7 |
|
|
|
35.3 |
|
|
|
— |
|
|
|
91.2 |
|
|
|
46.6 |
|
|
|
— |
|
Other COVID-19 costs (6) |
|
— |
|
|
|
0.2 |
|
|
|
16.6 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
65.0 |
|
Strategic initiatives (7) |
|
4.9 |
|
|
|
2.3 |
|
|
|
2.1 |
|
|
|
9.5 |
|
|
|
3.7 |
|
|
|
6.2 |
|
Technology development expense
(8) |
|
2.7 |
|
|
|
2.8 |
|
|
|
2.2 |
|
|
|
9.7 |
|
|
|
9.0 |
|
|
|
5.8 |
|
Stock-based compensation
expense |
|
1.2 |
|
|
|
0.4 |
|
|
|
0.4 |
|
|
|
7.3 |
|
|
|
2.5 |
|
|
|
1.5 |
|
Loss on disposal and
impairment of fixed and operating lease assets |
|
3.6 |
|
|
|
1.2 |
|
|
|
2.0 |
|
|
|
4.7 |
|
|
|
1.1 |
|
|
|
5.6 |
|
Trade name impairment (9) |
|
95.0 |
|
|
|
— |
|
|
|
— |
|
|
|
95.0 |
|
|
|
— |
|
|
|
— |
|
Loss from equity method
investments (10) |
|
2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
2.2 |
|
|
|
— |
|
|
|
— |
|
Other (11) |
|
2.1 |
|
|
|
0.5 |
|
|
|
1.9 |
|
|
|
7.5 |
|
|
|
(2.4 |
) |
|
|
4.4 |
|
Adjusted EBITDA |
$ |
48.6 |
|
|
$ |
88.9 |
|
|
$ |
106.1 |
|
|
$ |
98.5 |
|
|
$ |
242.5 |
|
|
$ |
323.3 |
|
(1) |
“Other
amortization” represents amortization of content and capitalized
cloud-based system implementation costs. |
(2) |
“Debt related loss (gain)” represents net losses and gains
associated with debt repurchases and the write-off of unamortized
fees and original issue discount associated with debt
refinancings. |
(3) |
"Investment remeasurement" represents net gains and losses
associated with our equity investments without readily determinable
fair values. |
(4) |
“(Gain) on sale leaseback” represents the gain attributable to
the sale leaseback of our distribution center in Opelika,
Alabama. |
(5) |
As discussed in greater detail below, "Excess import freight
costs" represents excess inbound freight costs (compared to our
standard costs based on recently negotiated carrier rates) due to
increased freight rates, in particular the significant transitory
impact of constrained ocean freight capacity and incremental
domestic transportation costs incurred due to unprecedented
congestion in U.S. ports arising from surging market demand for
shipping capacity as economies recovered from the COVID-19
pandemic. |
(6) |
“Other COVID-19 costs” represents costs incurred for store
location cleaning and capacity management labor, store location
cleaning supplies and deep clean services. |
(7) |
“Strategic initiatives” represents non-recurring costs, such as
third-party consulting costs and one-time start-up costs, that are
not part of our ongoing operations and are incurred to execute
differentiated, project-based strategic initiatives. |
(8) |
“Technology development expense” represents one-time IT project
management and implementation expenses, such as temporary labor
costs, third-party consulting fees and user fees incurred during
the development period of a new software application, that are not
part of our ongoing operations and are typically redundant during
the initial implementation of software applications or other
technology systems across different functional operations of our
business before they are in productive use. |
(9) |
“Trade name impairment” represents impairment charges recorded
on the JOANN Trade Name, which resulted from the quantitative
impairment analysis completed during fiscal 2023. |
(10) |
“Loss from equity method investments” represents the loss
recognized for our equity method investments. |
(11) |
“Other” represents the one-time impact of severance, sponsor
management fees, certain legal matters, employee recruitment,
employee transition and business transition activities. |
Table 5. JOANN
Inc. Reconciliation of Net Income (Loss) to
Adjusted Net Income
(Loss) (Unaudited)
|
Thirteen Weeks Ended |
|
|
Fifty-Two Weeks Ended |
|
|
January 28,2023 |
|
|
January 29,2022 |
|
|
January 30,2021 |
|
|
January 28,2023 |
|
|
January 29,2022 |
|
|
January 30,2021 |
|
|
(In millions except per share data) |
|
Net income (loss) |
$ |
(91.1 |
) |
|
$ |
13.6 |
|
|
$ |
38.3 |
|
|
$ |
(200.6 |
) |
|
$ |
56.7 |
|
|
$ |
212.3 |
|
Debt related loss (gain) |
|
— |
|
|
|
0.3 |
|
|
|
(2.2 |
) |
|
|
— |
|
|
|
3.3 |
|
|
|
(155.1 |
) |
Investment remeasurement |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.0 |
) |
|
|
— |
|
|
|
— |
|
(Gain) on sale leaseback |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
Excess import freight
costs |
|
16.7 |
|
|
|
35.3 |
|
|
|
— |
|
|
|
91.2 |
|
|
|
46.6 |
|
|
|
— |
|
Other COVID-19 costs |
|
— |
|
|
|
0.2 |
|
|
|
16.6 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
65.0 |
|
Strategic initiatives |
|
4.9 |
|
|
|
2.3 |
|
|
|
2.1 |
|
|
|
9.5 |
|
|
|
3.7 |
|
|
|
6.2 |
|
Technology development
expense |
|
2.7 |
|
|
|
2.8 |
|
|
|
2.2 |
|
|
|
9.7 |
|
|
|
9.0 |
|
|
|
5.8 |
|
Stock-based compensation
expense |
|
1.2 |
|
|
|
0.4 |
|
|
|
0.4 |
|
|
|
7.3 |
|
|
|
2.5 |
|
|
|
1.5 |
|
Loss on disposal and
impairment of fixed and operating lease assets |
|
3.6 |
|
|
|
1.2 |
|
|
|
2.0 |
|
|
|
4.7 |
|
|
|
1.1 |
|
|
|
5.6 |
|
Trade name impairment |
|
95.0 |
|
|
|
— |
|
|
|
— |
|
|
|
95.0 |
|
|
|
— |
|
|
|
— |
|
Loss on equity method
investments |
|
2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
2.2 |
|
|
|
— |
|
|
|
— |
|
Other |
|
2.1 |
|
|
|
0.5 |
|
|
|
1.9 |
|
|
|
7.5 |
|
|
|
(2.4 |
) |
|
|
4.4 |
|
Tax impact of adjustments
(12) |
|
(34.4 |
) |
|
|
(8.1 |
) |
|
|
(1.3 |
) |
|
|
(60.0 |
) |
|
|
(7.6 |
) |
|
|
17.2 |
|
Adjusted net income
(loss) |
$ |
2.9 |
|
|
$ |
48.5 |
|
|
$ |
60.0 |
|
|
$ |
(34.5 |
) |
|
$ |
89.9 |
|
|
$ |
162.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share |
$ |
(2.23 |
) |
|
$ |
0.32 |
|
|
$ |
1.06 |
|
|
$ |
(4.93 |
) |
|
$ |
1.35 |
|
|
$ |
5.93 |
|
Adjusted diluted earnings
(loss) per share |
$ |
0.07 |
|
|
$ |
1.16 |
|
|
$ |
1.65 |
|
|
$ |
(0.85 |
) |
|
$ |
2.14 |
|
|
$ |
4.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding - basic |
|
40.9 |
|
|
|
40.9 |
|
|
|
34.9 |
|
|
|
40.7 |
|
|
|
40.8 |
|
|
|
34.9 |
|
Weighted-average shares
outstanding - diluted |
|
40.9 |
|
|
|
41.9 |
|
|
|
36.3 |
|
|
|
40.7 |
|
|
|
42.1 |
|
|
|
35.8 |
|
(12) |
“Tax impact of adjustments” represents the tax effect of the total
adjustments based on our annual effective tax rate, before discrete
adjustments. |
Table 6. JOANN
Inc. Reconciliation of Gross Profit to
Adjusted Gross
Profit (Unaudited)
|
Thirteen Weeks Ended |
|
|
Fifty-Two Weeks Ended |
|
|
January 28, 2023 |
|
|
January 29, 2022 |
|
|
January 30, 2021 |
|
|
January 28, 2023 |
|
|
January 29,2022 |
|
|
January 30,2021 |
|
|
(In millions) |
|
Net sales |
$ |
692.8 |
|
|
$ |
735.3 |
|
|
$ |
840.8 |
|
|
$ |
2,216.9 |
|
|
$ |
2,417.6 |
|
|
$ |
2,762.3 |
|
Cost of sales |
|
389.1 |
|
|
|
410.9 |
|
|
|
446.3 |
|
|
|
1,176.6 |
|
|
|
1,204.9 |
|
|
|
1,396.1 |
|
Gross profit |
|
303.7 |
|
|
|
324.4 |
|
|
|
394.5 |
|
|
|
1,040.3 |
|
|
|
1,212.7 |
|
|
|
1,366.2 |
|
Excess import freight
costs |
|
16.7 |
|
|
|
35.3 |
|
|
|
— |
|
|
|
91.2 |
|
|
|
46.6 |
|
|
|
— |
|
Other COVID-19 costs |
|
— |
|
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
14.0 |
|
Adjusted gross profit |
$ |
320.4 |
|
|
$ |
359.7 |
|
|
$ |
395.3 |
|
|
$ |
1,131.5 |
|
|
$ |
1,259.3 |
|
|
$ |
1,380.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross margin |
|
46.2 |
% |
|
|
48.9 |
% |
|
|
47.0 |
% |
|
|
51.0 |
% |
|
|
52.1 |
% |
|
|
50.0 |
% |
Non-GAAP Financial Measures
Adjusted EBITDA
JOANN presents Adjusted EBITDA, which is not a
recognized financial measure under accounting principles generally
accepted in the United States of America (“GAAP”). JOANN presents
Adjusted EBITDA because it believes it assists investors and
analysts in comparing JOANN’s performance across reporting periods
on a consistent basis by excluding items that management does not
believe are indicative of JOANN’s core operating performance.
Management believes Adjusted EBITDA is helpful in highlighting
trends in JOANN’s core operating performance compared to other
measures, which can differ significantly depending on long-term
strategic decisions regarding capital structure, the tax
jurisdictions in which companies operate and capital investments.
JOANN also uses Adjusted EBITDA in connection with establishing
discretionary annual incentive compensation; supplementing GAAP
measures of performance in the evaluation of the effectiveness of
its business strategies; making budgeting decisions; and comparing
its performance against that of other peer companies using similar
measures.
JOANN defines Adjusted EBITDA as net income
(loss) plus income tax provision (benefit), interest expense, net,
and depreciation and amortization, further adjusted to eliminate
the impact of certain non-cash items and other items that
management does not consider indicative of JOANN's ongoing
operating performance, including other amortization, debt related
gains and losses, investment remeasurements, sale leaseback gains,
excess import freight and other COVID-19 costs, costs related to
strategic initiatives, technology development expenses, stock-based
compensation expense, gains and losses on disposal and impairment
of fixed and operating lease assets, intangible asset impairment,
income and losses from equity method investments and other one-time
costs. JOANN's adjustments for COVID-19 related costs include, as a
separate line item, excess import freight costs. The excess import
freight costs are directly attributable to surging market demand
for shipping capacity as economies recovered from the COVID-19
pandemic, as well as actions taken by government and industry
leaders designed to protect against further spread of the virus,
which disrupted the efficient operation of domestic and
international supply chains. These COVID-19 related conditions
produced an imbalance of ocean freight capacity and related demand,
as well as port congestion and other supply chain disruptions that
added significant cost to JOANN's procurement of imported
merchandise. These excess import freight costs included
significantly higher rates paid per container to ocean carriers, as
well as fees paid due to congested ports that JOANN did not
normally incur. In a normative operating environment, JOANN would
procure 70% to 80% of its needs for ocean freight under negotiated
contract rates, with the balance procured in a brokered market,
typically at no more than a 10% - 15% premium to JOANN's contract
rates. Accordingly, JOANN established a baseline cost (“standard
cost”) assuming those contract capacities, established rates and
typical premium in the brokered market for peak volume needs not
covered under our contracts. The amount of excess import freight
costs included as an adjustment to arrive at Adjusted EBITDA is
calculated by subtracting, from JOANN's actual import freight
costs, JOANN's standard cost for the applicable period. Negotiation
of JOANN's current contract rates was finalized in the second
quarter of fiscal 2023. JOANN has started to see a decline in
overall ocean freight rates and a reduction in other fees
associated with port congestion, which has positively impacted
JOANN's cash payments. JOANN is identifying these COVID-19 related
excess import freight costs as a separate line item in the table
above due to their magnitude and to distinguish them from other
COVID-19 related costs JOANN has previously excluded in calculating
Adjusted EBITDA.
Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of JOANN’s results as reported under GAAP.
Some of these limitations include:
- Adjusted EBITDA
does not reflect JOANN's cash expenditures or future requirements
for capital expenditures or contractual commitments;
- Adjusted EBITDA
does not reflect changes in JOANN's cash requirements for its
working capital needs;
- Adjusted EBITDA
does not reflect the interest expense and the cash requirements
necessary to service interest and principal payments on JOANN's
debt;
- Adjusted EBITDA
does not reflect cash requirements for replacement of assets that
are being depreciated and amortized;
- Adjusted EBITDA
does not reflect non-cash compensation, which is a key element of
JOANN’s overall long-term incentive compensation;
- Adjusted EBITDA
does not reflect the impact of certain cash charges or cash
receipts resulting from matters JOANN does not find indicative of
its ongoing operations; and
- other companies in
JOANN’s industry may calculate Adjusted EBITDA differently than it
does, limiting its usefulness as a comparative measure.
JOANN compensates for these limitations by
relying primarily on JOANN’s GAAP results and using Adjusted EBITDA
only as supplemental information.
Adjusted Net Income (Loss) and Adjusted
Diluted Earnings (Loss) per Share
JOANN presents adjusted net income (loss) and
adjusted diluted earnings (loss) per share, which are not
recognized financial measures under GAAP, because it believes these
additional key measures assist investors and analysts in comparing
JOANN’s performance across reporting periods on a consistent basis
by excluding items that management does not believe are indicative
of JOANN’s core operating performance. Management believes that
adjusted net income (loss) and adjusted diluted earnings (loss) per
share are helpful in highlighting trends in JOANN’s core operating
performance compared to other measures, which can differ
significantly depending on long-term strategic decisions regarding
capital structure and capital investments. JOANN also uses adjusted
net income (loss) and adjusted diluted earnings (loss) per share to
supplement GAAP measures of performance in the evaluation of the
effectiveness of its business strategies; to make budgeting
decisions; and to compare its performance against that of other
peer companies using similar measures.
JOANN defines adjusted net income (loss) as net
income (loss) adjusted to eliminate the impact of certain non-cash
items and other items that management does not consider indicative
of its ongoing operating performance, including debt related gains
and losses, investment remeasurements, sale leaseback gains, excess
import freight and other COVID-19 costs, costs related to strategic
initiatives, technology development expenses, stock-based
compensation expense, gains and losses on disposal and impairment
of fixed and operating lease assets, intangible asset impairment,
income and losses from equity method investments and other one-time
costs. The adjustments are itemized in the table above. Adjusted
diluted earnings (loss) per share is defined as adjusted net income
(loss) divided by the weighted-average number of common shares
outstanding assuming dilution in periods in which there is an
adjusted net income.
Adjusted Gross Profit and Adjusted Gross
Margin
JOANN presents adjusted gross profit and
adjusted gross margin, which are not recognized financial measures
under GAAP, because it believes they assist investors and analysts
in comparing JOANN’s performance across reporting periods on a
consistent basis by excluding items that management does not
believe are indicative of JOANN’s core operating performance.
JOANN defines adjusted gross profit as gross
profit excluding excess import freight costs and other COVID-19
costs and adjusted gross margin as adjusted gross profit divided by
net sales.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. JOANN intends such forward-looking statements
to be covered by the safe harbor provisions for forward-looking
statements contained in Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”) and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Readers can
generally identify forward-looking statements by the use of
forward-looking terminology such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“might,” “plan,” “potential,” “predict,” “seek,” “vision,”
“should,” or the negative thereof or other variations thereon or
comparable terminology. Many factors could affect JOANN’s actual
financial results and cause them to vary materially from the
expectations contained in forward-looking statements, including
those set forth in this document. These risks, uncertainties, and
factors include, among other things: the impact of inflationary
pressures and general economic conditions, including the impacts of
public health epidemics or pandemics, on JOANN’s ability to control
costs and on its customers level of discretionary income to spend
on sewing, arts and crafts and select home décor products; JOANN’s
ability to anticipate and effectively respond to disruptions or
inefficiencies in its distribution network, e-commerce fulfillment
function and transportation system, including availability and cost
of import and domestic freight; the effects of potential changes to
U.S. trade regulations and policies, including tariffs, on JOANN’s
business; developments involving JOANN’s competitors and its
industry; JOANN’s ability to maintain adequate liquidity, its level
of indebtedness, the impact of lease obligations and the
availability of capital, including its ability to raise additional
capital, could limit JOANN's financial flexibility and cash flow
necessary to fund working capital, planned capital expenditures,
and other general corporate purposes or ongoing needs of its
business; JOANN’s ability to timely identify or effectively respond
to consumer trends, and the potential effects of that ability on
its relationship with its customers, the demand for JOANN’s
products and its market share; JOANN’s expectations regarding the
seasonality of its business; JOANN’s ability to manage the distinct
risks facing its e-commerce business and maintain a relevant
omni-channel experience for its customers; JOANN’s ability to
maintain or negotiate favorable lease terms for its store
locations; JOANN’s ability to execute on its growth strategy to
renovate and improve the performance of its existing store
locations; JOANN’s ability to attract and retain a qualified
management team and other team members while controlling its labor
costs; JOANN’s reliance on and relationships with third party
service providers; JOANN’s reliance on and relationships with
foreign suppliers and their ability to supply it with adequate,
timely and cost-effective products for resale; JOANN’s ability, and
its third party service providers’ ability, to maintain security
and prevent unauthorized access to electronic and other
confidential information; the impacts of potential disruptions to
JOANN’s information systems, including its websites and mobile
applications; JOANN’s ability to respond to risks associated with
existing and future payment options; JOANN’s ability to maintain
and enhance a strong brand image; JOANN’s ability to maintain
adequate insurance coverage; JOANN’s status as a “controlled
company” and control of JOANN as a public company by affiliates of
Leonard Green & Partners, L.P.; the impact of evolving
governmental laws and regulations and the outcomes of legal
proceedings; and the amount and timing of repurchases of JOANN’s
common stock, if any.
The preceding list is not intended to be an
exhaustive list of all of JOANN’s forward-looking statements. JOANN
has based these forward-looking statements on its current
expectations, assumptions, estimates and projections. While JOANN
believes these expectations, assumptions, estimates and projections
are reasonable, such forward-looking statements are only
predictions and involve known and unknown risks and uncertainties,
many of which are beyond JOANN’s control. Given these risks and
uncertainties, Readers are cautioned not to place undue reliance on
such forward-looking statements. The forward-looking statements
included elsewhere in this document are not guarantees of future
performance and JOANN’s actual results of operations, financial
condition and liquidity and the development of the industry in
which it operates may differ materially from the forward-looking
statements included elsewhere in this document. In addition, even
if JOANN’s results of operations, financial condition and liquidity
and events in the industry in which it operates are consistent with
the forward-looking statements included elsewhere in this document,
they may not be predictive of results or developments in future
periods. Any forward-looking statement that JOANN makes in this
document speaks only as of the date of such statement. Except as
required by law, JOANN does not undertake any obligation to update
or revise, or to publicly announce any update or revision to, any
of the forward-looking statements, whether as a result of new
information, future events or otherwise after the date of this
document.
About JOANN
For almost 80 years, JOANN has inspired
creativity in the hearts, hands, and minds of its customers. From a
single storefront in Cleveland, Ohio, the nation’s category leader
in sewing and fabrics and one of the fastest growing competitors in
the arts and crafts industry has grown to include 833 store
locations across 49 states and robust e-commerce business. With the
goal of helping every customer find their creative Happy Place,
JOANN serves as a convenient single source for all of the supplies,
guidance and inspiration needed to achieve any project or
passion.
Investor Relations Contact:
Tom Filandro
646-277-1235
tom.filandro@icrinc.com
Corporate Communications:
Amanda Hayes
216-296-5887
amanda.hayes@joann.com
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