A.C. Moore Arts & Crafts, Inc. (
Q1 2011 Earnings Call
May 10, 2011 8:30 a.m. ET
David Stern – Chief Financial Officer
Joe Jeffries – Chief Executive Officer
David Abelman – Chief Marketing and Merchandising Officer
John Zaro – Bourgeon Capital
Karru Martinson – Deutsche Bank
Bernard Sosnick – Gilford Securities
Jack Balos – Focus Research
Mark Mandel – ThinkEquity
Previous Statements by ACMR
» A.C. Moore Arts & Crafts, Inc Q4 2010 Earnings Conference Call Transcript
» A.C. Moore CEO Discusses Q3 2010 Results - Earnings Call Transcript
» A.C. Moore Arts & Crafts, Inc Q2 2010 Earnings Call Transcript
» A.C. Moore Arts & Crafts, Inc. Q1 2010 Earnings Call Transcript
Please standby. Good day, everyone, and welcome to the A.C. Moore first quarter 2011 earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the conference to David Stern. Please go ahead, sir.
Good morning and welcome to the A.C. Moore first quarter 2011 conference call. Before we begin, I will remind you that statements contained in this conference call that are not historical facts constitute forward-looking statements within the meaning of Securities Laws. These statements are subject to risks and uncertainties, which may cause results to differ materially from current expectations expressed or implied by such statements.
The risks and uncertainties that are most likely to cause actual results to differ materially from our current expectations are described in our filings with the SEC. A.C. Moore undertakes no obligations to update or revise any forward-looking statement in the future.
Now, I’ll turn the call over to Joe Jeffries, CEO. Joe?
Thanks, Dave. This morning, in addition to David Stern, I’m joined by David Abelman our Chief Marketing and Merchandising Officer. I will begin by commenting on our performance and discuss some operational initiatives in the first quarter. Dave Stern will take you through our financial performance for the quarter and then David Abelman will touch upon some of our activities in merchandising and marketing.
For the first quarter 2010, total sales decline by 2.5% from the same period a year earlier, and our same-store sales declined by 2.6%. It’s important to point out that as referenced on the prior call, Easter occurred three weeks later in 2011 than in 2010. Since our quarter ends with fiscal March, the Easter shift caused a shift in sales for the three weeks preceding Easter from the first quarter in 2010 to the second quarter in 2011.
As a result, seasonal-related products accounted for a large part of our comp decline.
Our gross margin ended the quarter at 42.9%, which is a 10-basis point improvement, year over year.
Shifting our attention towards our merchandizing departments and inventory management efforts, we saw good performance in many of our merchandizing departments during the quarter, even with the Easter shift and the traffic declines that this shift caused. Those departments that performed well are celebrations, readymade frames and needle crafts. David Abelman will discuss the merchandizing and margin performance in more detail during his portion of today’s call.
Inventory ended down 5.1% at 115.7 million at cost, a reduction of $6.3 million. The quality of our inventory continues to improve as we move to change the ratio of warehouse to store inventory and discontinue the active.
In summary, inventory is down overall and has been shifted to the stores leading to better end stocks.
During the quarter we saw a level of execution continue to improve throughout the organization. This type of execution is expected as we focus on improving our operating performance in 2011 versus 2010.
I’d like to recap our store opening and closing activity that we discussed on the prior call. During the quarter we opened two new stores, one in Pottstown, Pennsylvania, and one in Williston, Vermont. And we closed one store, bringing our Nevada model total up to 30% of the total store base. Stores remodeled to the Nevada format generated a 380-basis point improvement versus the traditional store sales trend on a comp basis while delivering a respectable return on investment.
Additionally in anticipation of questions about the company’s February 15 announcement that the Board of Directors is exploring strategic alternatives, the company does not intend to disclose any developments regarding this process, unless the Board has additional information to share.
Now I’d like to turn the call over to Dave Stern, who will update you further on our financial performance. Dave?
Thanks, Joe. I’ll start with a review of results for the first quarter followed by a review of the cash and inventory positions as of April 2, 2011, and finish by providing some insights regarding our expectations for the 2011 fiscal year.
Sales for the quarter were 102.7 million, a decrease of 2.5% compared to sales of 105.4 million during the first quarter of last year. This decline is primarily due to a decrease in comparable store sales of 2.6%. The comparable store sales decreased, which composed of a 2.1% decrease in transaction and a 0.5% decrease in the average ticket.
As Joe referenced, first quarter sales were negatively impacted by the Easter shift this year.
At the end of the quarter there were 135 stores in operation compared to 136 at the comparable point last year. Gross margin for the quarter was 42.9%, potentially flat or a 0.1 percentage point increase from the first quarter of last year.
Selling, general, and administrative expenses for the quarter were 50.7 million, a decrease of 1.6 million or 3.1% compared to last year. This is primarily due to reduced advertising spend and cost related to the retirement of the prior CEO in Q1 of last year, partially offset by increased store payroll expense.