JOANN(JOAN) - 2023 Q1 - Quarterly Report

Financial Performance - Net sales decreased by 13.3% to $498.0 million compared to the first quarter of fiscal 2022, with total comparable sales decreasing by 12.9%[77] - Gross profit fell by 20.5% to $240.7 million, resulting in a gross margin of 48.3%, a decrease of 440 basis points from the prior fiscal year[77] - The company reported a net loss of $35.1 million for the first quarter of fiscal 2023, compared to a net income of $15.1 million in the same period last year[77] - Adjusted EBITDA for the first quarter of fiscal 2023 was $18.6 million, down from $57.5 million in the same period of the prior year[89] - Total comparable sales decreased primarily due to a reduction in transaction volume, particularly in the Craft Technology business, which had strong performance in the previous year[90] Expenses and Costs - SG&A expenses increased to $259.1 million, representing 52.0% of net sales, compared to 43.5% in the prior year[89] - SG&A expenses increased by $9.2 million or 3.7% to $259.1 million, representing 52.0% of net sales, an increase of 850 basis points, primarily due to higher distribution costs and inflationary pressures[92][93] Cash Flow and Capital Expenditures - Net cash used for operating activities was $122.2 million for the thirteen weeks ended April 30, 2022, compared to $43.5 million in the same period in fiscal 2021[106] - Total capital expenditures for the thirteen weeks ended April 30, 2022, were $19.3 million, up from $10.5 million in the same period in fiscal 2021, driven by new store openings and remodels[109] - Net cash provided by financing activities was $145.6 million during the thirteen weeks ended April 30, 2022, compared to $49.5 million in the same period in fiscal 2021, primarily from net borrowings under the Second Amended Revolving Credit Facility[112] Debt and Taxation - As of April 30, 2022, the company had $946.4 million of debt outstanding, an increase from $766.3 million as of May 1, 2021[96] - The effective income tax rate for the first quarter of fiscal 2023 was 30.8%, compared to 21.8% for the first quarter of fiscal 2022, reflecting a shift from tax provision to tax benefit status[98] Shareholder Actions - The company declared and paid a quarterly cash dividend of $4.5 million during the reporting period[77] - The company repurchased $1.9 million in face value of the Term Loan due 2024 at an average of 53% of par, resulting in a $1.0 million gain[97] Operational Insights - The impact of COVID-19 continues to affect operations, with ongoing supply chain disruptions and increased freight costs due to port congestion[76] - The company's net sales are stronger in the second half of the year compared to the first half, with peak sales occurring from September to December[115] - Working capital required for operations peaks during the second and third fiscal quarters due to increased inventory for the peak selling season[115] - There have been no material changes in the company's exposure to market risk during the thirteen weeks ended April 30, 2022[118] Store Operations - The total store location count at the end of the period was 846, down from 855 in the previous year[89] - The company acquired the remaining outstanding shares of WeaveUp for $4.3 million during the first quarter of fiscal 2023[77]