A.C. Moore Beats on Weak Sales - Analyst Blog

Berlin, New Jersey-based A.C. Moore Arts & Crafts, Inc (ACMR) reported a loss of 30 cents in the first quarter of 2011, edging out the Zacks Consensus Estimate of a loss of 32 cents and the year-ago quarter's loss of 31 cents. However, the company continues to report  a deficit due to poor sales.

Total revenue of the specialty retailer of arts, crafts and floral merchandise dropped 2.5% year over year to $102.7 million in the reported quarter attributable to a 2.6% plunge in same-store sales. Same-store sales remained soft due to the calendar shift of Easter in the first quarter of 2011.

The gross profit for the quarter fell 2.1% year over year to $44.1 million, however, gross margin inched up 10 basis points (bps) to 42.9%.

Selling, general and administrative expenses dropped 3.1% year over year to $50.7 million in the first quarter due to reduced advertising expenses and cost related to the retirement of the ex-CEO in the year-ago quarter, partially offset by an upside in payroll during the quarter. Moreover, selling, general and administrative expenses, as a percentage of revenue, fell 30 bps to 49.3%.

Stores Update

During the quarter, A.C. Moore opened two new stores and closed one store. The company currently operates 135 stores and plans to open no more stores in 2011. The company remodeled 12 stores in 2010 and expects to further remodel 4 to 6 stores in 2011.

Financial Position

A.C. Moore ended the quarter with cash and cash equivalents of $26.7 million and shareholders' equity of $124.5 million.

The company expects cash and cash equivalents of approximately $30 million for fiscal 2011.

Outlook

For 2011, the company anticipates a lower net loss compared to 2010.

Our Take

The company continues to undertake various initiatives to drive traffic and improve profitability but A.C. Moore has a long way to go. Hence, we expect a downward movement in estimates over the coming days. The Zacks Consensus Estimate for 2011 and 2012 is pegged at a loss of 73 cents and 35 cents, respectively.

On February 15, A.C. Moore reported that the board of directors is exploring strategic alternatives. This process is still in progress and the company does not plan to comment unless an option is approved.

One of A.C. Moore's primary competitors, First Cash Financial Services Inc. (FCFS), reported first quarter 2011 earnings of 50 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents and shot up 52% from the year-ago quarter on the back of strong pawn operations in both Mexico and the United States.