JOANN(JOAN) - 2023 Q3 - Quarterly Report

Financial Performance - Net sales decreased by 7.9% to $562.8 million compared to the third quarter of fiscal 2022, with total comparable sales down 8.0%[80] - Gross profit fell by 11.9% to $281.0 million, representing a gross margin of 49.9%, a decrease of 230 basis points year-over-year[80] - The company reported a net loss of $17.5 million for the third quarter of fiscal 2023, compared to a net income of $22.8 million in the same period last year[80] - Adjusted EBITDA for the third quarter was $40.2 million, down from $72.6 million in the prior year[85] - SG&A expenses increased to $269.0 million from $257.6 million year-over-year[88] - Net loss was $17.5 million for the thirteen weeks ended October 29, 2022, compared to net income of $22.8 million during the same period in fiscal 2022[99] - Adjusted EBITDA was $40.2 million for the thirteen weeks ended October 29, 2022, compared to $72.6 million for the same period in fiscal 2022[100] - For the thirty-nine weeks ended October 29, 2022, net sales were $1,524.1 million, a decrease of $158.2 million or 9.4% compared to the same period in fiscal 2022[101] - Gross profit for the thirty-nine weeks ended October 29, 2022, was $736.6 million, a decrease of $151.7 million or 17.1%, with a gross margin of 48.3%[102] - SG&A expenses for the thirty-nine weeks ended October 29, 2022, were $786.6 million, an increase of $32.1 million or 4.3%, representing 51.6% of net sales[103][104] - Net loss for the thirty-nine weeks ended October 29, 2022, was $109.5 million, compared to net income of $43.1 million during the same period in fiscal 2022[111] - Adjusted EBITDA for the thirty-nine weeks ended October 29, 2022, was $49.9 million, compared to $153.6 million for the same period in fiscal 2022[112] Cash Flow and Capital Expenditures - Net cash used for operating activities was $173.6 million for the thirty-nine weeks ended October 29, 2022, compared to $123.6 million for the same period in 2021, reflecting a decline in comparable sales and increased import freight costs[118] - Total capital expenditures for the thirty-nine weeks ended October 29, 2022, were $80.4 million, up from $42.9 million in 2021, driven by new store openings and refresh projects[121] - Cash used for investing activities included $4.3 million for the acquisition of WeaveUp during the first thirty-nine weeks of fiscal 2023[122] - Net cash provided by financing activities was $263.4 million for the thirty-nine weeks ended October 29, 2022, compared to $122.1 million in 2021, primarily due to net borrowings from the Second Amended Revolving Credit Facility[123] - The company had the ability to borrow an additional $74.5 million under the Second Amended Revolving Credit Facility as of October 29, 2022[123] Business Strategy and Market Position - The company declared and paid a quarterly cash dividend of $4.5 million[80] - Total comparable sales include e-commerce sales from joann.com and creativebug.com, reflecting the company's integrated digital strategy[79] - JOANN has been transforming from a traditional retailer to a digitally-connected provider of Creative Products since 2016[77] - The company expects 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[120] - The increase in capital expenditures for store locations was primarily driven by an increase in new store location and refresh projects in fiscal 2023 compared to fiscal 2022[121] Market Conditions and Seasonality - The company has seen a decline in overall ocean freight rates, which is expected to positively impact cash payments starting in the fourth quarter of fiscal 2023[82] - The business exhibits seasonality, with stronger net sales and net income during the second half of the year, particularly from September to December[126] - The company’s liquidity is not dependent on off-balance sheet transactions other than typical letters of credit in a retail environment[125] Fiscal Year Definition - The fiscal year ends on the Saturday closest to January 31, with fiscal 2023 referring to the year ending January 28, 2023[76]