Jo-Ann Stores Announces Financial Results for First Quarter

* Same-store sales increase 1.0%
* Gross Margin improves by 210 basis points
* Earnings Per Share more than doubles to $0.33

HUDSON, Ohio--(Business Wire)--
Jo-Ann Stores, Inc. (NYSE: JAS) today announced financial results for its fiscal
2010 first quarter ended May 2, 2009. Net income for the first quarter of fiscal
2010 was $8.6 million, or $0.33 per diluted share, compared with net income of
$3.0 million, or $0.12 per diluted share for the first quarter last year. The
current quarter net income includes a $0.7 million after-tax gain, or $0.03 per
diluted share, related to the purchase of a portion of the company`s senior
subordinated notes. Excluding this gain, net income for the first quarter was
$7.9 million, or $0.30 per diluted share.

Net sales for the first quarter increased 3.1% to $460.0 million from $446.1
million for the same period last year. Same-store sales increased 1.0% compared
with a 4.5% same-store sales increase for the first quarter last year.

Large-format store net sales for the quarter increased 5.8% to $244.1 million
compared to the same period last year. Same-store sales for large-format stores
decreased 0.6% compared with an increase of 3.3% in last year`s first quarter.
Small-format store net sales decreased 0.3% to $206.4 million compared to the
same period last year. Same-store sales for small-format stores increased 3.0%
compared with an increase of 5.8% for the same period last year. Internet sales
through Joann.com were $9.5 million in the first quarter of fiscal 2010 compared
to $8.2 million for the same period last year.

Darrell Webb, chairman, president and chief executive officer stated, "During
the first quarter of fiscal 2010, Jo-Ann Stores delivered solid operating
results as we grew sales, expanded margins, improved earnings, and continued to
reduce our debt. As the challenging economy persists, Jo-Ann`s product offering
is resonating with consumers seeking affordable, family-oriented activities. I
am pleased with the growth we are seeing in our core sewing and craft
categories, while seasonal and high ticket product sales continue to be
challenging."

"We are benefiting from our sharp focus on controlling costs and generating
operating efficiencies and we expect to further leverage these improvements as
the economy rebounds. I am pleased with our strong start to the year, but we
still have the majority of the year ahead of us and limited visibility into the
timing of a sustained retail recovery," Webb concluded.

Operating Results

Gross margins for the first quarter increased approximately 210 basis points to
48.5% from 46.4% in the first quarter of the prior year due to reduced product
costs from global sourcing initiatives, lower clearance levels and reduced
freight costs.

Selling, general and administrative expenses for the quarter increased to $190.4
million from $184.5 million for the same period last year. Selling, general and
administrative expenses as a percentage of net sales remained flat at 41.4% as
the company continues to manage operating costs.

Operating profit for the first quarter was $14.9 million versus $7.4 million for
the prior year`s first quarter.

Balance Sheet

The cash balance for the quarter ended May 2, 2009 of $85.0 million was an
increase of $27.1 million versus the end of the first quarter last year.
Long-term debt totaled $50.5 million, a reduction of $49.5 million compared to
the end of the first quarter last year. The improvements in cash and debt
balances were primarily the result of cash generated from operations and
improvements in working capital.

During the first quarter the company purchased $15.5 million of its senior
subordinated notes at an average discount of approximately 9% to par value, and
recorded a $1.2 million pre-tax gain including the write-off of deferred
financing costs.

Store Openings, Closings and Remodels

During the first quarter of fiscal 2010, the company opened 11 large-format
stores and one small-format store and closed one large-format store and 12
small-format stores. For fiscal 2010, the company expects to open approximately
20 new stores and close approximately 30 stores.

During the first quarter of fiscal 2010, the company remodeled two stores. In
fiscal 2010, the company expects to remodel approximately 30 stores.

Fiscal 2010 Outlook

The company is reaffirming its previously announced outlook for fiscal 2010.
Based upon management`s operating assumptions and current economic conditions,
the company`s key considerations underlying its outlook for fiscal 2010
include:

* Same-store sales decline of 2% to 4% for the year;
* Gross margin rate improvement for the year;
* Higher selling, general and administrative expenses as a percentage of net
sales for the year;
* Capital expenditures, net of landlord allowances, for the full year of $30 to
$32 million;
* Earnings per diluted share in the range of $0.70 to $0.85 for the year
(excluding any gains on debt purchases);
* Free cash flow in the range of $50 to $58 million for the year; (free cash
flow defined as net income plus depreciation and amortization, stock-based
compensation expense and changes in working capital, less capital expenditures);

* Weighted-average diluted share count of approximately 26 million shares for
the year.

Conference Call on the Web

Investors will have the opportunity to listen to the first quarter earnings
conference call at 4:30 p.m. ET today. The call can be accessed via the Internet
through Streetevents at http://www.streetevents.com and on our website at
http://www.joann.com (go to the bottom of our home page and click on "Investor
Relations," then click on the Conference Call icon). To listen to the live call,
please go to the website at least ten minutes before the call begins to
register, and download and install any necessary audio software. For those who
cannot listen to the live broadcast, a replay will be available shortly after
the call. The replay may be accessed at http://www.joann.com and at
http://www.streetevents.com or by phone at 800-642-1687, conference ID #
98822411.

Jo-Ann Stores, Inc. (http://www.joann.com), the leading national fabric and
craft retailer with locations in 47 states, operates 220 large-format stores and
543 small-format stores.

Use of Non-GAAP Financial Information

In this release, Jo-Ann Stores discloses pro forma or non-GAAP measures of net
income and earnings per share. Jo-Ann Stores believes that this pro forma
information provides greater comparability regarding its ongoing operating
performance. These measures should not be considered an alternative to
measurements required by accounting principles generally accepted in the United
States (GAAP), such as net income and earnings per share. These pro forma
measures are unlikely to be comparable to pro forma information provided by
other companies. In accordance with SEC regulations, reconciliation of the
Jo-Ann Stores GAAP information to the pro forma information is provided in the
table below. We will also make available on the investor relations page of our
website at http://www.joann.com this press release, a replay of the Webcast, and
a reconciliation of the difference between the GAAP and non-GAAP financial
measures.

This press release contains forward-looking statements that are subject to
certain risks and uncertainties.Our actual results, performance or achievements
may differ materially from those expressed or implied in the forward-looking
statements.Risks and uncertainties that could cause or contribute to such
material differences include, but are not limited to, general economic
conditions, changes in customer demand, changes in trends in the fabric and
craft industry, seasonality, failure to manage new store growth and the store
transition strategy, the availability of merchandise, changes in the competitive
pricing for products, the impact of competitors` store openings and closings,
longer-term unseasonable weather or widespread severe weather, our ability to
effectively manage our distribution network, our ability to recruit and retain
highly qualified personnel, our ability to sell-through our inventory at
acceptable prices, energy costs, increases in transportation costs, our
indebtedness and limits on obtaining additional financing, failure to maintain
the security of our electronic and other confidential information, failure to
comply with various laws and regulations, consumer confidence and debt levels,
and other capital market and geo-political conditions.Other important factors
that may cause actual results to differ materially from those expressed in the
forward-looking statements are discussed in the company`s Securities and
Exchange Commission filings.

JO-ANN STORES, INC.

Consolidated Statements of Operations

(Unaudited)

Thirteen Weeks Ended
May 2, May 3,
2009 2008
(Dollars in millions, except per share data)

Net sales $ 460.0 $ 446.1
Cost of sales 237.1 239.3
Gross margin 222.9 206.8
Selling, general and administrative expenses 190.4 184.5
Store pre-opening and closing costs 3.6 1.8
Depreciation and amortization 14.0 13.1
Operating profit 14.9 7.4
Gain on purchase of senior subordinated notes (1.2 ) -
Interest expense, net 1.6 2.4
Income before income taxes 14.5 5.0
Income tax provision 5.9 2.0
Net income $ 8.6 $ 3.0

Income per common share - basic $ 0.34 $ 0.12

Income per common share - diluted $ 0.33 $ 0.12

Weighted average shares outstanding (in thousands):
Basic 25,303 24,542
Diluted 25,844 25,043

OTHER INFORMATION

Number of stores open at period end:
Small-format stores 543 573
Large-format stores 220 199
763 772
Square footage at period end (000's):
Small-format stores 7,995 8,347
Large-format stores 8,147 7,528
16,142 15,875
Average square footage per store:
Small-format stores 14,724 14,567
Large-format stores 37,032 37,829

JO-ANN STORES, INC.

Condensed Consolidated Balance Sheets

(Unaudited)
May 2, May 3, January 31,
2009 2008 2009
(Dollars in millions)

Assets
Current assets:
Cash and cash equivalents $ 85.0 $ 57.9 $ 80.6
Inventories 406.6 426.9 429.4
Deferred income taxes 21.0 25.6 23.5
Prepaid expenses and other current assets 28.5 23.3 31.7
Total current assets 541.1 533.7 565.2

Property, equipment and leasehold improvements, net 307.0 297.5 314.8
Goodwill, net 11.6 11.8 11.6
Other assets 8.4 11.8 9.5
Total assets $ 868.1 $ 854.8 $ 901.1

Liabilities and Shareholders` Equity
Current liabilities:
Accounts payable $ 135.6 $ 125.8 $ 145.1
Accrued expenses 94.0 95.9 112.5
Total current liabilities 229.6 221.7 257.6

Long-term debt 50.5 100.0 66.0
Long-term deferred income taxes 3.1 - 3.2
Lease obligations and other long-term liabilities 97.1 88.4 96.6
Shareholders' equity 487.8 444.7 477.7
Total liabilities and shareholders' equity $ 868.1 $ 854.8 $ 901.1

JO-ANN STORES, INC.

Reconciliation of Non-GAAP Financial Information

(Unaudited)

Thirteen Weeks Ended
May 2, May 3,
2009 2008
(Dollars in millions, except per share data)

GAAP net income as reported $ 8.6 $ 3.0
Gain on purchase of senior subordinated notes 0.7 -
Non-GAAP pro forma net income $ 7.9 $ 3.0

GAAP income per common share - diluted $ 0.33 $ 0.12
Gain on purchase of notes per common share - diluted 0.03 -
Non-GAAP pro forma net income per common share - diluted $ 0.30 $ 0.12
Weighted average shares outstanding (in thousands):
Diluted 25,844 25,043

ICR, LLC
Investors
Brad Cohen, 330-463-6865
or
Jo-Ann Stores, Inc.
Public Relations
Lisa Greb, 330-463-3442
Director, Public Relations
http://www.joann.com

Copyright Business Wire 2009