A.C. Moore Arts & Crafts, Inc (ACMR)

Q4 2010 Earnings Conference Call

March 29, 2011 8:30 AM ET


David Stern – Chief Financial Officer

Joe Jeffries – Chief Executive Officer

David Abelman – Chief Marketing and Merchandising Officer


Bernard Sosnick – Gilford Securities

Mark Mandel – ThinkEquity

Jack Balos – Focus Research

Michael Corelli – Barry Vogel & Associates

Joan Storms – Wedbush

Tamas Eisenberger – BlueShore



Good day, and welcome to the A.C. Moore Fourth Quarter 2010 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. David Stern, Chief Financial Officer. Please go ahead sir.

David Stern – Chief Financial Officer

Thank you, Launda [ph]. Good morning and welcome to the A.C. Moore fiscal 2010 year end 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 our 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 Jeffries – Chief Executive Officer

Thank you, Dave. This morning, in addition to David Stern, I’m joined by David Abelman our Chief Marketing and Merchandising Officer. Dave will take you through our financial performance for the quarter and for the year and then David will discuss certain topics related to our merchandising and marketing performance.

I’d first like to make a few remarks about the fourth quarter’s performance. For the fourth quarter, our total sales declined 4.4%, while our same-store sales declined 4.3%. The fourth quarter for us was highly competitive and started later than expected in many seasonal gifts and decor-related categories.

The majorities of our sales declines were isolated in four departments, seasonal, home decor, scrap booking and fashion crafts. It was also important for us to not have any carryover of undesirable holiday decor items allowing our merchant team the opportunity to enter 2011 with a cleaner composition and the purchasing focus on new trend-right items and/or programs. David Abelman will speak more specifically regarding the merchandising performance during his portion of today’s call.

For the fiscal year, total sales declined 4.4% from the same period one year earlier and our same-store sales declined by 5.4%. Our gross margin in 2010 was 41.3%, an increase of 140 basis points due to improvements in our everyday and promotional price management as well as improvements in inventory, security and control. We believe that we made significant progress on our strategic initiatives during fiscal 2010 and that these initiatives will have a positive impact in fiscal 2011.

I would like to spend a few minutes discussing some of the operational achievements made during 2010. We implemented the four-hour order point solution in quarter one of fiscal 2010, a replenishment forecasting application that determines optimal inventory order levels on a weekly basis, balancing lost sales and inventory carrying costs for all of our 4.5 million SKU store combinations. We increased the percent of merchandise managed by automated replenishment from 52% to 75% providing better control of inventory levels across the chain. All of this was achieved while at the same time we delivered a total inventory reduction of 10.8 million, or 8.2% on a per store basis, while improving the store level overall in-stock position by more than 500 basis points.

We remodeled 12 stores in 2010.Stores remodeled to our Nevada format generated over a 400 basis point improvement versus our traditional stores on a comp basis while delivering a respectable return on investment. With regard to 2011, we expect to convert four to six traditional stores to the Nevada model. Currently, we do not have any stores planned for relocation in 2011. We opened two new stores, one in an existing market and one in an adjacent market while closing one store during the first quarter of 2011.

We will continue to evaluate new store opportunities and we may open additional new stores in fiscal 2011 beyond the two opened during the first quarter. Depending upon negotiations with landlords on lease terms and/or lease expirations, it is possible that we may choose to close additional stores during 2011.

After spending a significant amount of time and attention towards building a solid infrastructure and foundation, the company’s full attention is on regaining our market share in the areas in which we do business. We believe that our systems are firmly rooted. We are pleased that approximately one-third of our store portfolio has been converted to our new Nevada model and that our inventory composition is in better condition than in the past several years with little to no seasonal carryover. We believe that we are positioned firm improved performance in 2011.

Now, I’d like to turn the call over to Dave Stern who will update you further on our financial performance. Dave?

David Stern – Chief Financial Officer

Thank you, Joe. I’ll start with a review of results for the fourth quarter and full year all by review of the cash and inventory positions as of January 1, 2011 and finish by providing some insight regarding our assumptions for the 2011 fiscal year.

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