A.C. Moore Reports Loss - Analyst Blog

Berlin, New Jersey-based A.C. Moore Arts & Crafts, Inc (ACMR) reported disappointing fourth quarter 2010 results. The company posted an adjusted loss of 13 cents, below the Zacks Consensus Estimate of profit of 3 cents. Including an one-time item, A.C. Moore recorded a quarterly net loss of $4.8 million or 20 cents, higher than the loss of $0.5 million or 2 cents per share posted in the year-earlier quarter. The lower-than-expected results were due to poor sales.

The company's full-year loss was $30.2 million or $1.23, compared with $25.9 million or $1.15 per share in fiscal 2009. Excluding the one-time expense of 15 cents, the loss in 2010 was $1.08.

Total revenue of the specialty retailer of arts, crafts and floral merchandise dropped 4.4% year over year to $143.2 million in the reported quarter attributable to a 4.3% plunge in same-store sales. In 2010, revenues were $448.1 million, representing a year over year decline of 4.4% attributable to a same-store sales fall of 5.4%.

The gross margin for the quarter was down slightly by 10 basis points to 37.7%, due to sluggish top-line results.

Selling, general and administrative expenses dropped 2.4% year over year to $57.6 million in the fourth quarter due to reduced asset impairment expenses partially offset by an upside in payroll during the quarter. However, selling, general and administrative expenses as a percentage of revenue spiked 80 bps to 40.2%.

Stores Update

During the quarter, A.C. Moore closed one store and currently operates 134 stores. The company remodeled 12 stores in 2010 and expects to convert 46 stores in 2011.

The company remains focused on expansion by opening new stores and during the first quarter of 2011, A.C. Moore opened two new stores.

Financial Position

A.C. Moore ended the year with cash and cash equivalents of $40.0 million and shareholders' equity of $131.4 million. On March 4, 2011, the company also renewed its credit facility for the next five years.  

Outlook

In the first quarter of 2011, A.C. Moore projects a net loss greater than that in the first quarter of 2010. In 2011, the company anticipates a lower net loss compared to 2010.

Our Take

The company has reported unsatisfactory results. Hence we expect a downward movement in estimates over the coming days.

One of A.C. Moore's primary competitors, First Cash Financial Services Inc. (FCFS), reported fourth quarter 2010 adjusted earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate of 54 cents and soared 42% from the year-ago quarter.