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Jo-Ann Sews Up Earnings Beat

The crafts retailer also offers higher-than-expected guidance. Shares jump.

Shares of

Jo-Ann Stores


climbed in late trading Monday after the crafts retailer posted a stronger-than-expected fourth-quarter profit, bolstered by improved margins.

The company also offered an earnings forecast for the current year that was well above Wall Street's expectation. Shares were trading up $2.11, or 9.2%, to $24.99 in the after-hours session.

For the quarter ending Feb. 3, the Hudson, Ohio-based company earned $25.8 million, or $1.05 a share. Analysts polled by Thomson Financial had an average estimate for earnings of 98 cents a share.

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A year earlier, Jo-Ann recorded a loss of $18 million, or 78 cents a share, including a charge of $27.1 million for goodwill impairment.

Jo-Ann's fourth-quarter sales slipped 0.5% to $600.8 million from $604.1 million a year earlier. Wall Street expected sales of $614 million.

Same-store sales, or sales at stores open at least a year, tumbled 6%. The company said the sales decrease was brought about by planned reductions of holiday inventory and less clearance merchandise in the stores.

Gross margins increased 310 basis points to 45% from 41.9%, which the company attributed to a fewer markdowns, better sell-through on seasonal goods and reduced sales of clearance inventory.

"During the quarter we continued to make progress on our merchandising strategy and inventory position," said Darrell Webb, chairman, president and CEO, in a statement. "While our actions have resulted in a decline in same-store sales, we were able to realize significant gross margin improvement in the fourth quarter compared to the same period last year."

For the full year, Jo-Ann reported a loss of $1.9 million, or 8 cents a share, narrowed from a loss of $23 million, or $1.01 loss a share, a year earlier. Sales dipped 1.7% to $1.85 billion, while same-store sales decreased 5.9%.

Looking ahead to fiscal 2008, the company projected earnings of 55 cents to 65 cents a share, ahead of Wall Street's estimate of 30 cents a share. Jo-Ann also expects positive same-store sales for the year, as well as continued margin improvement.