JOANN(JOAN) - 2023 Q2 - Quarterly Report

Financial Performance - Net sales decreased by 6.8% to $463.3 million compared to the second quarter of fiscal 2022, with total comparable sales down 6.2%[79] - Gross profit fell by 19.5% to $214.9 million, representing a gross margin of 46.4%, a decrease of 730 basis points year-over-year[79] - The company reported a net loss of $56.9 million for the second quarter of fiscal 2023, compared to a net income of $5.2 million in the same period last year[79] - Adjusted EBITDA for the thirteen weeks ended July 30, 2022, was $(8.9) million, a significant decline from $23.5 million in the same period of the previous year[85] - Net loss for the thirteen weeks was $56.9 million, a decrease of $62.1 million compared to the same period in fiscal 2022[103] - Adjusted EBITDA was a loss of $8.9 million, compared to income of $23.5 million in the same period last year[104] - For the twenty-six weeks ended July 30, 2022, net sales were $961.3 million, a decrease of $110.0 million or 10.3% compared to the same period in fiscal 2022[105] - Gross profit for the twenty-six weeks was $455.6 million, down $113.9 million or 20.0%, with a gross margin of 47.4%, a decrease of 580 basis points[106] - Adjusted EBITDA for the twenty-six weeks decreased 88.0% to $9.7 million, or 1.0% of net sales, compared to $81.0 million, or 7.6% of net sales, in the prior year[117] - The company experienced a net loss of $55.6 million for the twenty-six weeks ended July 30, 2022, influenced by various operational costs and strategic initiatives[120] Operating Expenses - SG&A expenses increased to $258.5 million from $247.0 million year-over-year, contributing to the operating loss of $63.5 million[90] - SG&A expenses increased to $258.5 million, up $11.5 million or 4.7%, representing 55.8% of net sales, an increase of 610 basis points[96] - SG&A expenses for the twenty-six weeks were $517.6 million, an increase of $20.7 million or 4.2%, representing 53.8% of net sales, an increase of 740 basis points[108] Cash Flow and Investments - Net cash used for operating activities was $166.1 million for the twenty-six weeks ended July 30, 2022, compared to $82.1 million for the same period in 2021, primarily due to a decline in comparable sales and increased product costs[123] - Total capital expenditures for the twenty-six weeks ended July 30, 2022, were $50.7 million, up from $28.6 million in the same period in 2021, driven by new store openings and refresh projects[126] - The company plans to invest between $150,000 and $3 million per store for refresh projects, targeting over 80% of existing locations over the next seven to ten years[125] - Net cash provided by financing activities was $220.1 million during the twenty-six weeks ended July 30, 2022, compared to $57.5 million in the same period in 2021, primarily from borrowings under the Second Amended Revolving Credit Facility[128] - The company purchased the remaining outstanding stock of WeaveUp for $4.3 million in the first half of fiscal 2023, indicating ongoing strategic investments[127] - As of July 30, 2022, the company had the ability to borrow an additional $89.7 million under the Second Amended Revolving Credit Facility[128] Operational Challenges - The impact of COVID-19 continues to affect operations, particularly in terms of supply chain costs and consumer behavior[78] - The company is experiencing excess import freight costs due to increased shipping rates and port congestion, which are expected to decline in the latter half of fiscal 2023[82] Business Strategy - JOANN's strategy since 2016 has focused on transforming from a traditional retailer to a digitally-connected provider of creative products[76] - The business exhibits seasonality, with stronger net sales and net income expected in the second half of the fiscal year, particularly from September to December[131] Store Operations - JOANN operated 843 store locations across 49 states as of July 30, 2022, all of which were fully operational[78]