JOANN(JOAN) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales for the thirteen weeks ended July 29, 2023, were $453.8 million, a decrease of 2.1% compared to the same period in fiscal 2023[84]. - Total comparable sales decreased by 2.0% for the same period, an improvement from a 6.2% decline in the prior fiscal year[84]. - Gross profit increased by 8.0% to $232.0 million, with a gross margin of 51.1%, reflecting a 470 basis point increase year-over-year[85]. - The net loss for the second quarter of fiscal 2024 was $73.3 million, compared to a net loss of $56.9 million in the same period last year[74]. - Adjusted EBITDA for the thirteen weeks ended July 29, 2023, was $(21.9) million, compared to $(8.9) million in the same period last year[83]. - Net sales for the twenty-six weeks ended July 29, 2023, were $931.9 million, a decline of $29.4 million or 3.1% compared to the same period in fiscal 2023[94]. - Gross profit for the twenty-six weeks ended July 29, 2023, was $481.0 million, an increase of $25.4 million or 5.6% compared to the same period in fiscal 2023, with a gross margin of 51.6%[95]. - Net loss for the twenty-six weeks ended July 29, 2023, was $127.5 million, an increase of $35.5 million compared to the same period in fiscal 2023[101]. - Adjusted EBITDA for the twenty-six weeks ended July 29, 2023, decreased 289.7% to ($18.4) million, or 2.0% of net sales, compared to $9.7 million, or 1.0% of net sales for the same period in fiscal 2023[102]. Expenses and Costs - SG&A expenses as a percentage of net sales increased to 59.5% from 55.8% in the prior year[83]. - SG&A expenses for the thirteen weeks ended July 29, 2023, were $269.9 million, an increase of $11.4 million or 4.4% compared to the same period in fiscal 2023, representing 59.5% of net sales, an increase of 370 basis points[88][1]. - SG&A expenses for the twenty-six weeks ended July 29, 2023, were $532.8 million, an increase of $15.2 million or 2.9% compared to the same period in fiscal 2023, representing 57.2% of net sales, an increase of 340 basis points[97][1]. - Interest expense for the thirteen weeks ended July 29, 2023, was $26.8 million, an increase of $13.6 million compared to the same period in fiscal 2023, with an average debt level of $1,079.0 million and a weighted average interest rate of 9.82%[89][1]. - Interest expense for the twenty-six weeks ended July 29, 2023, was $52.1 million, an increase of $27.7 million compared to the same period in fiscal 2023, with an average debt level of $1,068.8 million and a weighted average interest rate of 9.28%[98][1]. Sales Trends - The decline in net sales was primarily driven by decreases in average ticket size, particularly in craft technology and non-Halloween seasonal categories[84]. - Positive results were noted in needle arts and Halloween seasonal business due to earlier merchandise availability[84]. - The company's net sales are stronger in the second half of the year, with net income peaking from September to December, aligning with the peak selling season[115]. Asset and Market Risk - A quantitative impairment analysis indicated that the fair value of the reporting unit exceeded the carrying value by approximately $103.0 million, or 10.1%[118]. - Management noted that no specific negative events occurred during the interim period that would trigger goodwill or intangible asset impairment testing[117]. - An increase in the assumed discount rate by approximately 120 basis points or a decrease in gross margin by approximately 50 basis points could necessitate impairment charges[118]. - There have been no material changes in the company's exposure to market risk during the twenty-six weeks ended July 29, 2023[119].