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HOUSE OF FABRICS INC. ANNOUNCES SECOND QUARTER RESULTS

 HOUSE OF FABRICS INC. ANNOUNCES SECOND QUARTER RESULTS
 SHERMAN OAKS, Calif., Aug. 19 /PRNewswire/ -- House of Fabrics Inc. (NYSE: HF) experienced a modest loss in the seasonally slow second quarter ended July 31, 1992. The company was profitable for the first half of its fiscal year.
 Second quarter sales increased 29 percent to $126,617,000 from $98,089,000, primarily reflecting the company's acquisition of Fabricland last year. The net loss for the period was $415,000 equal to 3 cents per share, compared with net income of $1,548,000, or 12 cents per share, one year ago. Average shares outstanding in the current quarter were 13,988,750, compared with 12,708,328 in the prior year, with the increase due to the Fabricland acquisition.
 For the first half, sales totaled $252,933,000, up 27 percent from $199,320,000 in the prior year. Net income was $2,236,000, equal to 16 cents per share, vs. $4,923,000, or 40 cents per share in the previous year.
 Gary L. Larkins, president and chief executive officer, said: "We continue to face a difficult competitive situation in a sluggish economy. Results for the quarter were basically in line with expectations. Except for the noncash goodwill charge of $324,000 incurred from the acquisition, we were close to a breakeven level.
 "Our game plan for the quarter was to drive sales momentum through aggressive advertising and promotional activity. We were successful in generating store-for-store increases of 3 percent, compared to the 2 percent decline in the first quarter of the year. However, this effort had the anticipated impact of increasing our cost of sales and lowering gross margin. In addition, we had higher costs related to our stepped-up store opening program.
 "The company continues to focus its energies on completing the conversion of our operations to the large superstore format. During the first half, we opened or acquired 43 new super stores while closing 36 older locations, primarily smaller, mall-based units. In last year's first half, we opened 15 new super stores and closed 37 locations. We are on target with our objective of opening 80 to 90 new super stores in the current fiscal year. Presently the company operates 502 super stores and 173 mall-based units.
 "Our expanding base of super stores, which average 12,000 square feet of space, offer multiple advantages. Customers are attracted to the convenience of these stores as well as the greater depth and variety of such products as fabrics, crafts, notions and sewing machines. Typically these stores gain strength each year with additional maturity, and so the conversion program should continue to provide us with substantial additional benefits over the next several years.
 "Our acquisition of 84 top performing Fabricland stores last year added strength and momentum to this strategy. Subsequently, two more Fabricland stores have been opened. We continue to be very pleased at the results being produced by these large stores which are primarily located in the Pacific Northwest."
 Larkins concluded: "As we enter the second half period when we generate the vast majority of the company's sales and earnings, we optimistic that House of Fabrics will achieve a strong, profitable level of operations. We expect to complete our aggressive promotional activity by the end of the third quarter which should benefit gross margin in the all-important fourth quarter.
 "The present environment continues to pose uncertainties, but our mode of operations has demonstrated strength and resilience under various economic conditions. In recent years, we've shown our ability to operate successfully in a deep recession. However, with the anticipated improvement of the American economy in coming months, we expect that our business will benefit overall. With our well- directed strategies, we're particularly optimistic about the company's longer-term prospects."
 House of Fabrics Inc. is the nation's leading chain of company owned and operated retail fabric stores with 675 currently in operation.
 HOUSE OF FABRICS INC.
 Summary of Consolidated Operations
 (Unaudited)
 Three months ended July 31,
 1992 1991
 Sales $126,617,000 $98,089,000
 Expenses:
 Cost of sales $66,326,000 $49,873,000
 Selling, general & administrative $59,036,000 $44,736,000
 Operating profit $1,255,000 $3,480,000
 Interest expense $1,403,000 $928,000
 Intangibles amortization $324,000 ---
 Income (loss) before income taxes ($472,000) $2,552,000
 Income taxes $57,000 $1,004,000
 Net income (loss) ($415,000) $1,548,000
 Net income (loss) per share ($.03) $.12
 Average shares outstanding 13,988,750 12,708,328
 Six months ended July 31,
 1992 1991
 Sales $252,933,000 $199,320,000
 Expenses:
 Cost of sales $129,747,000 $100,412,000
 Selling, general & administrative $115,819,000 $89,100,000
 Operating profit $7,367,000 $9,808,000
 Interest expense $2,668,000 $1,584,000
 Intangibles amortization $649,000 ---
 Income before income taxes $4,050,000 $8,224,000
 Income taxes $1,814,000 $3,301,000
 Net income $2,236,000 $4,923,000
 Net income per share $.16 $.40
 Average shares outstanding 14,058,157 12,401,795
 HOUSE OF FABRICS INC.
 Summary Balance Sheet Information
 (Unaudited)
 July 31, 1992 April 30, 1992
 Inventories $278,396,000 $261,294,000
 Property -- net $62,043,000 $59,062,000
 Total assets $398,770,000 $375,406,000
 Bank debt $113,290,000 $80,475,000
 Other liabilities $109,153,000 $118,269,000
 Total liabilities $222,443,000 $198,744,000
 Shareholders' equity $176,327,000 $176,662,000
 -0- 8/19/92
 /CONTACT: Gary Larkins, president of House of Fabrics, 818-995-7000/
 (HF) CO: House of Fabrics Inc. ST: California IN: REA SU: ERN


KJ-JB -- LA004 -- 1205 08/19/92 08:31 EDT
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Date:Aug 19, 1992
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