Tuesday, March 08, 2005

Is Decorating A Nightmare? Help is here!

STOCK OF THE WEEK
Martin Luther King weekend of 2005, the Asbury Sunday School Class at Maple Springs United Methodist Church enjoyed a long weekend at Myrtle Beach SC. The weather was not the greatest but the company was the finest. The homeowners association had contracted for renovations to the buildings hallways, few people other than class members and family were in the building so we took advantage and turned the long hallway into a bocci ball court.

We had a great time, playing games, taking walks on the beach and visiting restaurants, outlet malls and other venues in the area. Better still, we got to know one another all the better. The most enjoyable time was a joint Sunday School session. We sat where we could watch the waves roll into the beach while participating in a wide-open discussion. The young and old participated. As a sentimental old fool, I cried.

Chuck and Sandra Kupsky made the trip with their delightful daughters Emily and Megan. Instead of a long introduction, I will simply state that these are "good folks"; the kind of people you want to get to know better.

Sandra and I learned of our mutual intense interest in investing. We both hunger to do as well as we can and we know we need to learn all we can. Sandra was thrilled to know that I have been writing about the market. She really liked my idea to post a "Stock of the Week" as a way to build a monitored portfolio on the web. We decided to work together to learn more and to share what we learn.

In the weeks after the Myrtle Beach trip, Sandra and I have been working. We have spent much time screening, re-screening and re-screening for the best stocks. The criteria we used included criteria that has worked for us in the past and criteria that is supported as valid by volumes of research. After a little trial and error, we have decided that I should do the screening until we get down to a list of 40 to 50 selections and that Sandra will do the "nitty-gritty" work required to choose the final weekly selection.

The following article represents much work. We have not invested in the company, but we expect to buy shares. We confess to be amateurs. We study the markets because we enjoy learning. We write for educational and entertainment purposes only. Nothing we write should be considered investment advice. Should you invest, the risk is yours and yours alone.

Is Decorating A Nightmare? Help is Here!

Turn on the Home & Garden Network any time of day or night to get tips on all your decorating needs. Program after program help a novice decorator like me in their creative decorating endeavors. That got me thinking, I can watch a variety of Home Decorating Shows on how to "set the mode" of my home, but where do I go to find the "stuff" I need. In searching for a "Stock of the Week" (SOW) I discovered Jo-Ann Stores (JAS). JAS is celebrating its 60th anniversary. It is the Nation's Largest Fabric and Craft Retailer with locations in 47 states.

Jo-Ann Store was founded on a single retail store in 1943. As of January 31, 2005 the retailer operates 851 stores, 114 are superstores. Averaging 35,000 square feet, the- "Create-It-Yourself" Superstore generates almost four times the revenue of their traditional store and houses a variety of competitively priced merchandise used in home decorating, sewing and crafting projects, including fashion & decorative fabrics, notions, frames, scrap booking material, florals, home d├ęcor items and seasonal merchandise. The company offers customers like me the choice, quality, style and support needed to pursue the passion of creating beautiful things. For additional information, visit Joann's.

When Alan Rosskamm was 10 years old, he spent his spare time in his Grandmother Hilda's store, straightening thread racks and folding fabric remnants. Today he is president and CEO of the nation's leading fabric and crafts retailer. He is the third generation involved in Jo-Ann stores, Inc., continuing the legacy of vision, quality & service.

The year 1995 marked a turning point when Jo-Ann opened a 45,000-square-foot test store, adjacent to its Cleveland headquarters, stocked with every imaginable creative item to "serve and inspire creativity." The store became the pilot for the larger format Jo-Ann Superstores. Their traditional stores average approximately 14,400 square feet. The Superstores offer an expanded and more comprehensive product assortment than their traditional stores and generate four times the revenue and approximately 30 percent higher sales per square foot. The current Superstore prototype averages 35,000 square feet. Management believes their Superstore concept represents significant opportunity for future sales growth.

With the Fourth Quarter earnings released Monday March 7th, Alan Rosskamm believes they are on the right track. The stock has been trading near its annual high of $30.18. He is pleased with performance in a year when the focus was on the long term strategy of converting to the Superstore format. Seventy-two traditional stores were closed or a total of 1,036,800 square feet compared with the opening of 29 Superstores or 1,015,000 square feet. Assuming the Superstores generate 4 X's the revenue and approximately 30% higher sales, 40 new Superstores planned this year should deliver continued earnings growth. Rosskamm is planning a more aggressive program of Superstore conversions in future years.

On January 13th, Jo-Ann announced plans for the third distribution center to support continued growth. Ground will break in March on a 700,000-square foot center in Opelika, AL to support the key southern states of Florida, Georgia and Texas. The distribution center is expected to begin shipping to stores April 2006. The new center will create about 425 jobs, making Jo-Ann one of the largest employers in Opelika, a city located just outside of Auburn, Ala.

Tony Dissinger, senior vice president supply chain management and logistics said the
Alabama center will reduce transportation costs and will speed delivery to the southern stores. The other two distribution centers are located in Visalia, CA and Hudson, OH.

Joann.com gives customers 24-hour-a-day access to creative projects and products. The site is designed to be a resource for sewing and crafting enthusiasts and offers content that is informational, trendy, inspiring and fun.

I also like the company because they demonstrate strong moral values. For example, Jo-Ann Stores, Inc. partners with customers and employees to raise hundreds of thousands of dollars annually to donate to national federated social service and charitable organizations such as Save the Children Save the Children.

From one 1400-square-foot store in 1943 to almost 900 United States locations today-employing more than 20,000 people-Jo-Ann Stores, Inc., has not only witnessed a creative explosion in sewing and crafts, it has helped inspire it. With 60 years experience, I believe Jo-Ann Stores is a company that strives hard to enrich our lives with the latest high-quality products from around the world, by helping us find and express our creativity every day, and by providing the ideas, inspiration and advice to help our projects succeed.

It would have been nice to have gotten our report finished last week before the earnings announcement, but we took the time to select the company we like the best. Besides, who can complain about the outstanding quarter. Earnings rose 21% to 32.4 million dollars, $1.40 per share.

Note also that we selected a contrary play. You will find few brokerage houses "pushing" retail stocks at the current time. Just remember that Barauk was correct when he said about a 100 years ago that the best time to buy your straw hats is in the winter time.

Also please note that same store sales were up 4.3%! In retail, same store sales is the metric you want to be strong.

Happy decorating!

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