##### Table of Contents



United States
Securities and Exchange Commission
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended July 31, 2010
 Commission File No. 1-6695
 
 Jo-Ann Stores, Inc.
  Ohio
(State or other jurisdiction of 
incorporation or organization)
    
    34-0720629
(I.R.S. Employer Identification No.)5555 Darrow Road, Hudson, Ohio
(Address of principal executive offices)
    
    44236
(Zip Code)
 (330) 656-2600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



Jo-Ann Stores, Inc.
Form 10-Q Index
For the Quarter Ended July 31, 2010
 Page NumbersPart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets  July 31, 2010 (Unaudited),
August 1, 2009 (Unaudited) and January 30, 2010
    
    
    1Unaudited Consolidated Statements of Operations for the Thirteen
and Twenty-Six Weeks Ended July 31, 2010 and August 1, 2009
    
    
    2Unaudited Consolidated Statements of Cash Flows for the
Twenty-Six Weeks Ended July 31, 2010 and August 1, 2009
    
    
    3Notes to Unaudited Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II. Other InformationItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Reserved
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Jo-Ann Stores, Inc.
 
 Consolidated Balance Sheets
 (Unaudited)July 31,
    
    
    August 1,
    
    
    January 30,2010
    
    
    2009
    
    
    2010(Dollars in millions, except share and per share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    126.1
    
    
    $
    80.2
    
    
    $
    217.1Inventories
    
    
    445.6
    
    
    
    460.1
    
    
    
    416.8Deferred income taxes
    
    
    19.9
    
    
    
    20.3
    
    
    
    22.3Prepaid expenses and other current assets
    
    
    45.0
    
    
    
    36.0
    
    
    
    29.9Total current assets
    
    
    636.6
    
    
    
    596.6
    
    
    
    686.1Property, equipment and leasehold improvements, net
    
    
    297.2
    
    
    
    302.7
    
    
    
    293.7Goodwill
    
    
    11.6
    
    
    
    11.6
    
    
    
    11.6Other assets
    
    
    8.8
    
    
    
    8.3
    
    
    
    9.0Total assets
    
    $
    954.2
    
    
    $
    919.2
    
    
    $
    1,000.4Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    169.0
    
    
    $
    178.5
    
    
    $
    151.1Accrued expenses
    
    
    99.9
    
    
    
    96.6
    
    
    
    128.6Senior subordinated notes  short term
    
    
    
    
    
    
    
    
    
    
    47.5Total current liabilities
    
    
    268.9
    
    
    
    275.1
    
    
    
    327.2Long-term debt
    
    
    
    
    
    
    50.5
    
    
    
    Long-term deferred income taxes
    
    
    3.7
    
    
    
    
    
    
    
    2.2Lease obligations and other long-term liabilities
    
    
    108.3
    
    
    
    105.3
    
    
    
    105.4Commitments and contingencies (Note 5)Shareholders equity:Preferred stock, no par value, 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    
    
    
    
    Common stock, stated value $0.05 per share; 150,000,000 authorized;
issued 30,812,850; 29,366,390 and 29,989,966 shares, respectively
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.5Additional paid-in capital
    
    
    253.7
    
    
    
    218.1
    
    
    
    234.7Retained earnings
    
    
    400.6
    
    
    
    315.8
    
    
    
    377.0655.8
    
    
    
    535.4
    
    
    
    613.2Treasury stock, at cost; 4,590,338; 3,756,128 and 3,773,890 shares,
respectively
    
    
    (82.5
    )
    
    
    (47.1
    )
    
    
    (47.6
    )Total shareholders equity
    
    
    573.3
    
    
    
    488.3
    
    
    
    565.6Total liabilities and shareholders equity
    
    $
    954.2
    
    
    $
    919.2
    
    
    $
    1,000.4
   1




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Jo-Ann Stores, Inc.
 
 Consolidated Statements of Operations
 (Unaudited)
 Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in millions, except share and per share data)Net sales
    
    $
    439.3
    
    
    $
    419.4
    
    
    $
    919.6
    
    
    $
    879.4Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    217.6
    
    
    
    212.8
    
    
    
    455.5
    
    
    
    449.9Gross margin
    
    
    221.7
    
    
    
    206.6
    
    
    
    464.1
    
    
    
    429.5Selling, general and administrative expenses
    
    
    194.5
    
    
    
    193.3
    
    
    
    389.9
    
    
    
    383.7Store pre-opening and closing costs
    
    
    2.6
    
    
    
    2.8
    
    
    
    4.8
    
    
    
    6.4Depreciation and amortization
    
    
    14.5
    
    
    
    13.9
    
    
    
    28.7
    
    
    
    27.9Operating profit (loss)
    
    
    10.1
    
    
    
    (3.4
    )
    
    
    40.7
    
    
    
    11.5Gain on purchase of senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Interest expense, net
    
    
    0.5
    
    
    
    1.5
    
    
    
    1.4
    
    
    
    3.1Income (loss) before income taxes
    
    
    9.6
    
    
    
    (4.9
    )
    
    
    39.3
    
    
    
    9.6Income tax provision (benefit)
    
    
    4.2
    
    
    
    (1.7
    )
    
    
    15.7
    
    
    
    4.2Net income (loss)
    
    $
    5.4
    
    
    $
    (3.2
    )
    
    $
    23.6
    
    
    $
    5.4Net income (loss) per common share  basic
    
    $
    0.21
    
    
    $
    (0.13
    )
    
    $
    0.90
    
    
    $
    0.21Net income (loss) per common share  diluted
    
    $
    0.20
    
    
    $
    (0.13
    )
    
    $
    0.87
    
    
    $
    0.21Weighted average shares outstanding (in
thousands):Basic
    
    
    26,333
    
    
    
    25,516
    
    
    
    26,304
    
    
    
    25,405Diluted
    
    
    27,215
    
    
    
    25,516
    
    
    
    27,279
    
    
    
    26,093
   2




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Jo-Ann Stores, Inc.
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,2010
    
    
    2009(Dollars in millions)Net cash flows provided by operating activities:Net income
    
    $
    23.6
    
    
    $
    5.4Adjustments to reconcile net income to net cash
provided
by operating activities:Depreciation and amortization
    
    
    28.7
    
    
    
    27.9Deferred income taxes
    
    
    3.9
    
    
    
    Stock-based compensation expense
    
    
    4.2
    
    
    
    4.2Amortization of deferred financing costs
    
    
    0.4
    
    
    
    0.3Loss on disposal of fixed assets
    
    
    0.7
    
    
    
    0.9Gain on purchase of senior subordinated notes
    
    
    
    
    
    
    (1.2
    )Gross excess tax deficit on stock-based compensation
    
    
    
    
    
    
    (0.4
    )Changes in operating assets and liabilities:Increase in inventories
    
    
    (28.8
    )
    
    
    (30.7
    )Increase in prepaid expenses and other current assets
    
    
    (15.1
    )
    
    
    (4.3
    )Increase in accounts payable
    
    
    17.9
    
    
    
    33.4Decrease in accrued expenses
    
    
    (28.7
    )
    
    
    (6.3
    )Increase (decrease) in lease obligations, net
    
    
    2.3
    
    
    
    (0.7
    )Increase (decrease) in other long-term liabilities
    
    
    0.6
    
    
    
    (0.2
    )Other, net
    
    
    (0.3
    )
    
    
    0.7Net cash provided by operating activities
    
    
    9.4
    
    
    
    29.0Cash flows used for investing activities:Capital expenditures
    
    
    (32.8
    )
    
    
    (16.7
    )Cash used for investing activities
    
    
    (32.8
    )
    
    
    (16.7
    )Net cash flows used for financing activities:Purchase of senior subordinated notes
    
    
    (47.5
    )
    
    
    (14.1
    )Proceeds from stock-based compensation plans
    
    
    8.4
    
    
    
    2.4Purchase of Jo-Ann Stores, Inc. common stock
    
    
    (34.9
    )
    
    
    (1.3
    )Gross excess tax benefit on stock-based compensation
    
    
    6.4
    
    
    
    0.3Net cash used for financing activities
    
    
    (67.6
    )
    
    
    (12.7
    )Net decrease in cash and cash equivalents
    
    
    (91.0
    )
    
    
    (0.4
    )Cash and cash equivalents at beginning of period
    
    
    217.1
    
    
    
    80.6Cash and cash equivalents at end of period
    
    $
    126.1
    
    
    $
    80.2Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    2.4
    
    
    $
    3.1Income taxes, net of refunds
    
    
    34.9
    
    
    
    16.6
   3




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Notes to Consolidated Financial Statements (Unaudited)
 Jo-Ann Stores, Inc
 Note 1  Basis of Presentation
          4




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Note 2  Earnings Per Share
   Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average shares outstanding:Basic common shares
    
    
    26,333
    
    
    
    25,516
    
    
    
    26,304
    
    
    
    25,405Incremental shares from assumed
exercise of stock options
    
    
    360
    
    
    
    
    
    
    
    411
    
    
    
    169Incremental restricted shares
    
    
    522
    
    
    
    
    
    
    
    564
    
    
    
    519Diluted common shares
    
    
    27,215
    
    
    
    25,516
    
    
    
    27,279
    
    
    
    26,093
    5




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Note 3  Shareholders Equity
 Common
    
    
    Additional
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Treasury
    
    
    
    Stock Stated
    
    
    Paid-In
    
    
    Treasury
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Shares
    
    
    
    Value
    
    
    Capital
    
    
    Stock
    
    
    Earnings
    
    
    Equity(Shares in thousands)
    
    
    
    (Dollars in millions)Balance, January 30, 2010
    
    
    26,216
    
    
    
    3,774
    
    
    
    $
    1.5
    
    
    $
    234.7
    
    
    $
    (47.6
    )
    
    $
    377.0
    
    
    $
    565.6Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.6
    
    
    
    23.6Exercise of stock options
    
    
    424
    
    
    
    
    
    
    
    
    
    
    
    
    7.5
    
    
    
    
    
    
    
    
    
    
    
    7.5Excess tax benefits on
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.4
    
    
    
    
    
    
    
    
    
    
    
    6.4Stock-based compensation
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    
    4.2
    
    
    
    
    
    
    
    
    
    
    
    4.2Purchase of common stock
    
    
    (816
    )
    
    
    816
    
    
    
    
    
    
    
    
    
    
    
    
    (34.9
    )
    
    
    
    
    
    
    (34.9
    )Associate Stock Ownership
Plan
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Year-to-date activity
    
    
    7
    
    
    
    816
    
    
    
    
    
    
    
    
    19.0
    
    
    
    (34.9
    )
    
    
    23.6
    
    
    
    7.7Balance, July 31, 2010
    
    
    26,223
    
    
    
    4,590
    
    
    
    $
    1.5
    
    
    $
    253.7
    
    
    $
    (82.5
    )
    
    $
    400.6
    
    
    $
    573.3
  Note 4  Financing
   Note 5  Commitments and Contingencies
   Note 6  Segment Reporting
   6




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Large-format
    
    
    Small-format(Dollars in millions)
    
    Stores
    
    
    Stores
    
    
    Other
    
    
    ConsolidatedThirteen Weeks Ended July 31, 2010Net sales
    
    $
    238.2
    
    
    $
    192.4
    
    
    $
    8.7
    
    
    $
    439.3Store pre-opening and closing costs
    
    
    1.1
    
    
    
    1.5
    
    
    
    
    
    
    
    2.6Depreciation and amortization
    
    
    7.5
    
    
    
    3.0
    
    
    
    4.0
    
    
    
    14.5Operating profit (loss)
    
    
    19.1
    
    
    
    22.2
    
    
    
    (31.2
    )
    
    
    10.1Capital expenditures
    
    
    1.8
    
    
    
    8.1
    
    
    
    7.9
    
    
    
    17.8Thirteen Weeks Ended August 1, 2009Net sales
    
    $
    229.3
    
    
    $
    182.6
    
    
    $
    7.5
    
    
    $
    419.4Store pre-opening and closing costs
    
    
    0.5
    
    
    
    2.3
    
    
    
    
    
    
    
    2.8Depreciation and amortization
    
    
    8.1
    
    
    
    2.5
    
    
    
    3.3
    
    
    
    13.9Operating profit (loss)
    
    
    14.3
    
    
    
    17.3
    
    
    
    (35.0
    )
    
    
    (3.4
    )Capital expenditures
    
    
    1.2
    
    
    
    4.9
    
    
    
    4.0
    
    
    
    10.1Twenty-Six Weeks Ended July 31, 2010Net sales
    
    $
    496.1
    
    
    $
    404.5
    
    
    $
    19.0
    
    
    $
    919.6Store pre-opening and closing costs
    
    
    1.4
    
    
    
    3.4
    
    
    
    
    
    
    
    4.8Depreciation and amortization
    
    
    15.0
    
    
    
    5.8
    
    
    
    7.9
    
    
    
    28.7Operating profit (loss)
    
    
    49.9
    
    
    
    53.7
    
    
    
    (62.9
    )
    
    
    40.7Capital expenditures
    
    
    5.1
    
    
    
    16.3
    
    
    
    11.4
    
    
    
    32.8Property, equipment and leasehold
improvements, net
    
    
    141.8
    
    
    
    67.7
    
    
    
    87.7
    
    
    
    297.2Twenty-Six Weeks Ended August 1,
2009Net sales
    
    $
    477.5
    
    
    $
    384.9
    
    
    $
    17.0
    
    
    $
    879.4Store pre-opening and closing costs
    
    
    2.3
    
    
    
    4.1
    
    
    
    
    
    
    
    6.4Depreciation and amortization
    
    
    16.0
    
    
    
    5.1
    
    
    
    6.8
    
    
    
    27.9Operating profit (loss)
    
    
    36.3
    
    
    
    42.8
    
    
    
    (67.6
    )
    
    
    11.5Capital expenditures
    
    
    4.8
    
    
    
    5.7
    
    
    
    6.2
    
    
    
    16.7Property, equipment and leasehold
improvements, net
    
    
    159.9
    
    
    
    50.4
    
    
    
    92.4
    
    
    
    302.7
  7




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Note 7  Subsequent Event
    8




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  General Overview
    Executive Overview
     9




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Recent Developments and Business Update
 Outlook for Fiscal 2011
  
    
    Same-store sales increase of approximately 3.0% to 4.0% for the year versus the
previously announced range of approximately 2.5% to 3.5%;
    
    Gross margin rate improvement of 70 to 90 basis points for the year versus the
previously announced range of 40 to 70 basis points;
    
    SG&A, as a percentage of net sales, improvement of 50 to 70 basis points for the year
versus the previously announced range of 30 to 60 basis points;
    
    Capital expenditures, net of landlord allowances, for the full year in the range of $52
to $54 million versus the previously announced guidance of approximately $50 million;
  10




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
    
    Earnings per diluted share in the range of $3.20 to $3.35 for the year versus the
previously announced range of $2.95 to $3.10;
    
    Free cash flow in the range of $83 to $88 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, net of landlord allowances) versus
the previously announced range of $80 to $85 million;
    
    Weighted-average diluted share count of approximately 27.2 million shares for the year
versus the previously announced weighted-average diluted share count of approximately 27.4
million shares.
  Results of Operations
  Percentage of Net SalesThirteen Weeks
    
    
    Twenty-Six WeeksEnded
    
    
    EndedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross margin
    
    
    50.5
    %
    
    
    49.3
    %
    
    
    50.5
    %
    
    
    48.8
    %Selling, general and administrative
expenses
    
    
    44.3
    %
    
    
    46.1
    %
    
    
    42.4
    %
    
    
    43.6
    %Store pre-opening and closing costs
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    0.5
    %
    
    
    0.7
    %Depreciation and amortization
    
    
    3.3
    %
    
    
    3.3
    %
    
    
    3.2
    %
    
    
    3.2
    %Operating (loss) profit
    
    
    2.3
    %
    
    
    (0.8
    )%
    
    
    4.4
    %
    
    
    1.3
    %
 Net Sales .
 Consolidated Net Sales
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeConsolidated net sales
    
    $
    439.3
    
    
    $
    419.4
    
    
    
    4.7
    %
    
    $
    919.6
    
    
    $
    879.4
    
    
    
    4.6
    %Increase from prior year
    
    $
    19.9
    
    
    
    
    
    
    
    
    
    
    $
    40.2Same-store sales
percentage change
    
    
    4.4
    %
    
    
    1.8
    %
    
    
    
    
    
    
    4.2
    %
    
    
    1.4
    %
  11




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Comparison of the Thirteen Weeks Ended July 31, 2010 to August 1, 2009
    Comparison of the Twenty-Six Weeks Ended July 31, 2010 to August 1, 2009
     12




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##### Table of Contents



Sales by Segment:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeLarge-format storesNet sales
    
    $
    238.2
    
    
    $
    229.3
    
    
    
    3.9
    %
    
    $
    496.1
    
    
    $
    477.5
    
    
    
    3.9
    %Increase from prior year
    
    $
    8.9
    
    
    
    
    
    
    
    
    
    
    $
    18.6Same-store sales
percentage change
    
    
    3.0
    %
    
    
    0.1
    %
    
    
    
    
    
    
    2.4
    %
    
    
    (0.2
    )%Small-format storesNet sales
    
    $
    192.4
    
    
    $
    182.6
    
    
    
    5.4
    %
    
    $
    404.5
    
    
    $
    384.9
    
    
    
    5.1
    %Increase from prior year
    
    $
    9.8
    
    
    
    
    
    
    
    
    
    
    $
    19.6Same-store sales
percentage change
    
    
    6.2
    %
    
    
    3.9
    %
    
    
    
    
    
    
    6.6
    %
    
    
    3.4
    %OtherNet sales
    
    $
    8.7
    
    
    $
    7.5
    
    
    
    16.0
    %
    
    $
    19.0
    
    
    $
    17.0
    
    
    
    11.8
    %Increase from prior year
    
    $
    1.2
    
    
    
    
    
    
    
    
    
    
    $
    2.0
 Comparison of the Thirteen Weeks Ended July 31, 2010 to August 1, 2009
       13




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Comparison of the Twenty-Six Weeks Ended July 31, 2010 to August 1, 2009
      Gross Margin.
 Gross Margin:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeGross margin
    
    $
    221.7
    
    
    $
    206.6
    
    
    
    7.3
    %
    
    $
    464.1
    
    
    $
    429.5
    
    
    
    8.1
    %Increase from prior year
    
    $
    15.1
    
    
    
    
    
    
    
    
    
    
    $
    34.6Percentage of
consolidated net sales
    
    
    50.5
    %
    
    
    49.3
    %
    
    
    
    
    
    
    50.5
    %
    
    
    48.8
    %
    14




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##### Table of Contents



Selling, general and administrative expenses.
 Selling, General and Administrative Expenses:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeSelling, general and
administrative expenses
    
    $
    194.5
    
    
    $
    193.3
    
    
    
    0.6
    %
    
    $
    389.9
    
    
    $
    383.7
    
    
    
    1.6
    %Increase from prior year
    
    $
    1.2
    
    
    
    
    
    
    
    
    
    
    $
    6.2Percentage of
consolidated net sales
    
    
    44.3
    %
    
    
    46.1
    %
    
    
    
    
    
    
    42.4
    %
    
    
    43.6
    %
     Store pre-opening and closing costs.
  15




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##### Table of Contents



Store pre-opening and closing costs:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeStore pre-opening and
closing costs
    
    $
    2.6
    
    
    $
    2.8
    
    
    
    7.1
    %
    
    $
    4.8
    
    
    $
    6.4
    
    
    
    25.0
    %Decrease from prior year
    
    $
    (0.2
    )
    
    
    
    
    
    
    
    
    
    $
    (1.6
    )Percentage of
consolidated net sales
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    
    
    
    
    0.5
    %
    
    
    0.7
    %Store pre-opening costs
    
    $
    2.2
    
    
    $
    1.2
    
    
    
    83.3
    %
    
    $
    3.9
    
    
    $
    3.1
    
    
    
    25.8
    %Increase from prior year
    
    $
    1.0
    
    
    
    
    
    
    
    
    
    
    $
    0.8Stores opened
    
    
    4
    
    
    
    3
    
    
    
    
    
    
    
    14
    
    
    
    15Store closing costs
    
    $
    0.4
    
    
    $
    1.6
    
    
    
    75.0
    %
    
    $
    0.9
    
    
    $
    3.3
    
    
    
    72.7
    %Decrease from prior year
    
    $
    (1.2
    )
    
    
    
    
    
    
    
    
    
    $
    (2.4
    )Stores closed
    
    
    2
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    21
    Depreciation and amortization.
  Operating Profit:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeOperating profit (loss)
    
    $
    10.1
    
    
    $
    (3.4
    )
    
    
    397.1
    %
    
    $
    40.7
    
    
    $
    11.5
    
    
    
    253.9
    %Increase from prior year
    
    $
    13.5
    
    
    
    
    
    
    
    
    
    
    $
    29.2Percentage of
consolidated net sales
    
    
    2.3
    %
    
    
    (0.8
    )%
    
    
    
    
    
    
    4.4
    %
    
    
    1.3
    %
   16




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##### Table of Contents



Operating Profit (Loss) by Segment:
 Thirteen Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,
    
    
    Percentage
    
    
    July 31,
    
    
    August 1,
    
    
    Percentage(Dollars in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeLarge-format storesOperating profit
    
    $
    19.1
    
    
    $
    14.3
    
    
    
    33.6
    %
    
    $
    49.9
    
    
    $
    36.3
    
    
    
    37.5
    %Increase from prior year
    
    $
    4.8
    
    
    
    
    
    
    
    
    
    
    $
    13.6Small-format storesOperating profit
    
    $
    22.2
    
    
    $
    17.3
    
    
    
    28.3
    %
    
    $
    53.7
    
    
    $
    42.8
    
    
    
    25.5
    %Increase from prior year
    
    $
    4.9
    
    
    
    
    
    
    
    
    
    
    $
    10.9OtherOperating loss
    
    $
    (31.2
    )
    
    $
    (35.0
    )
    
    
    10.9
    %
    
    $
    (62.9
    )
    
    $
    (67.6
    )
    
    
    7.0
    %Decrease from prior year
    
    $
    3.8
    
    
    
    
    
    
    
    
    
    
    $
    4.7
 Comparison of the Thirteen Weeks Ended July 31, 2010 to August 1, 2009
    Comparison of the Twenty-Six Weeks Ended July 31, 2010 to August 1, 2009
    Gain on purchase of senior subordinated notes.
  17




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##### Table of Contents



Interest expense.
   Income taxes .
 Liquidity and Capital Resources
   Dollars in millions
    
    2011
    
    
    2010Net cash provided by operating activities
    
    $
    9.4
    
    
    $
    29.0Cash used for investing activities
    
    
    (32.8
    )
    
    
    (16.7
    )Net cash used for financing activities
    
    
    (67.6
    )
    
    
    (12.7
    )Net decrease in cash and cash equivalents
    
    $
    (91.0
    )
    
    $
    (0.4
    )Ending cash and cash equivalents
    
    $
    126.1
    
    
    $
    80.2
  18




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##### Table of Contents



Net cash provided by operating activities
  Cash used for investing activities
  Twenty-Six Weeks EndedJuly 31,
    
    
    August 1,Dollars in millions
    
    2010
    
    
    2009Cash
    
    $
    28.2
    
    
    $
    9.8Cash  landlord reimbursed
    
    
    4.6
    
    
    
    6.9Total
    
    $
    32.8
    
    
    $
    16.7
  Net cash used for financing activities
     19




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##### Table of Contents



Off-Balance Sheet Transactions
  Seasonality and Inflation
   Critical Accounting Policies
  Contractual Obligations
   20




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##### Table of Contents



Cautionary Statement Concerning Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
     21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Purchases of Equity Securities by Jo-Ann Stores, Inc.
 Total Number of
    
    
    Maximum NumberShares Purchased
    
    
    of Shares that MayTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plans orPurchased
    
    
    per Share
    
    
    or Programs
    
    
    ProgramsMay 2  29, 2010
    
    
    
    
    
    
    
    
    
    
    1,666,575
    
    
    
    483,425May 30  July 3, 2010
    
    
    350,693
    
    
    $
    44.05
    
    
    
    2,017,268
    
    
    
    132,732July 4  31, 2010
    
    
    13,127
    
    
    $
    42.24
    
    
    
    2,030,395
    
    
    
    119,605Total
    
    
    363,820
    
    
    $
    43.99
    
    
    
    2,030,395
    
    
    
    119,605
    
 Item 3. Defaults Upon Senior Securities
   22




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##### Table of Contents



Item 4. Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
 No.
    
    Exhibit Description3.1
    
    
    Amended and Restated Code of Regulations of Jo-Ann Stores, Inc.
(filed as Exhibit 3.1 to the companys Form 8-K filed with the
Commission on June 11, 2010 and incorporated herein by reference)10.1
    
    
    Jo-Ann Stores, Inc. 2008 Incentive Compensation Plan, as amended and
restated (filed as Exhibit 10.1 to the companys Form 8-K filed with
the Commission on June 11, 2010 and incorporated herein by reference)31.1
    
    
    Section 302 Certification By Chief Executive Officer31.2
    
    
    Section 302 Certification By Chief Financial Officer32.1
    
    
    Section 906 Certification of Principal Executive Officer and
Principal Financial Officer
  23




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##### Table of Contents



SIGNATURES
  JO-ANN STORES, INC.DATE: September 9, 2010
    /s/ Darrell WebbDarrell Webb,Chief Executive Officer/s/ James KerrJames Kerr,Executive Vice President and Chief Financial Officer  24