Hancock Fabrics Reports January Sales and Announces 30 Store Closings.

BALDWYN, Miss. -- Hancock Fabrics, Inc. (NYSE: HKF), today reported that sales in the five-week period ended February 3, 2007 totaled $35.1 million, compared to $31.9 million in the four-week period of the prior year ended January 28, 2006. The increase in total sales was due to having an extra week in 2006, partially offset by having 44 fewer stores this year and a decline in comparable store sales of 4.0% in January attributable, in part, to difficult weather conditions in the Southwest and Midwest. The comparable store sales change is based on sales during the four weeks of January that were comparable between both years.

In the fourth quarter, total sales were $111.7 million versus $118.3 million a year ago, and comparable store sales were down 4.9%. In the full year, total sales were $388.3 million versus $403.2 million in 2005. Comparable store sales in 2006 declined 1.9%, including a 2.7% benefit from 42 stores that were liquidated earlier in the year in connection with store closing sale events.

Beginning in the first quarter of 2007, the Company will report sales on a quarterly basis and will discontinue its practice of reporting sales monthly, due to the fluctuations that occur between months as a result of changes in the timing of promotional activity, holidays and the retail calendar. This is particularly apparent in 2007, which starts a week later than the prior year due to 2006 having 53 weeks.

The Company also announced that it has made a decision to close 30 stores, representing approximately $18 million in annualized sales. Approximately one-half of the 30 stores have leases that expire in 2007 or 2008, while the others have lease commitments expiring in years 2009 to 2015. The remaining commitments under all 30 of these leases total approximately $8 million. The Company has engaged a national firm to market the leases in an attempt to maximize recoveries and has engaged a second national firm to oversee the inventory liquidation sales in these stores during the first quarter of 2007.

As these 30 stores are closed, charges to earnings will be recorded to the extent that the continuing occupancy costs exceed amounts estimated to be recoverable through subleasing the properties or early termination of the leases. In addition, as the inventory liquidation sales take place, there will likely be losses incurred as a result of the liquidation pricing. In connection with the store closings, the Company currently estimates that it will incur total charges of approximately $4 million to $6 million. The total future cash expenditures in connection with these activities are currently expected to be approximately $2 million to $3 million, which is net of anticipated proceeds of $5 million to $6 million from subleasing the store locations or terminating the leases early.

Hancock Fabrics, Inc. - America's Fabric Store - is committed to serving creative enthusiasts with a complete selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines. The Company operates 403 retail stores in 40 states and an Internet store at www.hancockfabrics.com.