Why the JOANN share rallied up to 16% at the start of today’s trading
Actions of a retailer specializing in crafts JEANNE (NASDAQ: JOAN) rose rapidly by 16% as trading began on Friday. Investors were clearly happy with the company’s earnings update, released after the market closed on Thursday. This was the retailer’s second quarterly report since its IPO in March, and that factor adds some complications here.
Private equity firm Leonard Green & Partners privatized JOANN about a decade ago, but early this year the company decided to bring the niche retailer back to public markets. Considering the pandemic, it may seem like a bad time to take such a step. However, crafts and craft supplies have been in high demand as the coronavirus has kept people at home longer than usual. Notably, the company’s fiscal 2021 sales were up 23% year-over-year when it released them on April 1, just weeks after its IPO. Although this is a good result to see, JOANN’s fiscal year ends in January, so it was not a public company during this entire period. But, as Thursday’s earnings update showed, the strength continued into the first quarter of its fiscal 2022, when revenue grew 15% year-over-year.
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While this represented a slowdown in revenue growth, it was still a solid number, especially with the rollout of vaccines and the reopening of the U.S. economy, people have more options to spend their free time again. It seems that for many people, the love of craftsmanship that was ignited or rekindled during the pandemic continues.
That said, the really edifying figure in Thursday’s report was for bottom line, where JOANN reported adjusted earnings of $ 0.46 per share, down from a loss of $ 0.31 in the previous year’s quarter. Again, however, it is necessary to note that the company was not public in the first quarter of fiscal 2021, and was only public for a few weeks of the just released fiscal quarter, so this comparison comes with a few problems and caveats. Still, analysts wanted JOANN to report a profit of just $ 0.18 per share.
Overall, not only has the niche retailer demonstrated an ongoing sales force, but it has also far exceeded expectations on Wall Street. It’s easy to see why the investors were happy.
While there is certainly good news in the release of JOANN’s results, investors should probably take the numbers with a grain of salt. The current retail environment is strange, and JOANN is still months away from releasing its full first quarter as a public company. In other words, there are a lot of moving parts here. And, including Friday’s early gains, stocks have risen about 33% since their IPO just three months ago, incorporating a significant amount of good news in a very short period of time. More conservative investors may want to wait for further earnings updates before deciding whether or not to buy this stock.
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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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