##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF
    1934
  For the fiscal year-ended February 3, 2007
  Commission File
    No. 1-6695
      JO-ANN STORES, INC.
 (Exact name of Registrant as
    specified in its charter)
  Ohio

34-0720629(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   5555 Darrow Road, Hudson,
    Ohio


44236(Address of principal executive
    offices)


(Zip Code
)    (330) 656-2600
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each
    Class

Name of Each
    Exchange on Which RegisteredCommon Shares, Without Par
    Value
    Common Share Purchase Rights

New York Stock Exchange
    New York Stock Exchange       o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer  o
    Accelerated
    filer  þ
    Non-accelerated
    filer  o  Rule 12b-2 o þ




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##### Table of Contents



PART I
  53-week
  Item 1.
    Business  Jo-Ann Fabric and Craft Jo-Ann
      and/or
   1




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##### Table of Contents



Recent
    Developments and Business Update
      
    We reduced inventory by $61.3 million or 12 percent as
    compared to the prior year.
    We reduced our debt level by $78.4 million compared to the
    prior year.
    We also initiated the Merchandise Assortment Project or
    MAP during the first half of the year. This project
    involved substantial changes in product assortments,
    plan-o-grams, and store layouts, and expanded our selection of
    craft products.
    Gross margin for the fourth quarter increased 310 basis
    points. On a full-year basis, gross margin increased
    90 basis points.
    We reviewed all areas of our business for opportunities to
    reduce and control expenses. During fiscal 2007, we continued
    our workforce reduction of certain administrative personnel.      
    Improve the customer shopping experience.  We
    are committed to improving the customer shopping experience by
    removing excess inventory and clutter from our stores, raising
    expectations for store cleanliness, improving our in-stock on
    basic merchandise and improving our customer service.
    Enhance our marketing and merchandising
    offers.  We will drive sales growth by enhancing
    our marketing and merchandising offers. Marketing enhancements
    include changes in the appearance, content and distribution of
    our advertising. We plan on rolling out new vendor programs,
    such as American Greetings products and Singer sewing machines.
    We will implement new plan-o-gram processes in order to offer
    compelling and fresh product assortments that also inspire
    customers with displays of finished sewing and craft projects
    throughout the stores. We will also make tighter buys on fashion
    and promotional items for faster turns and improved margins.
    Refine our new store and remodel programs.  We
    will refine our new store programs in order to generate better
    performance from new superstores. In addition, we will refine
    our remodel programs in order to generate better performance
    from our traditional stores and older superstores.   2




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##### Table of Contents



Product
    Selection
    Fiscal
    Year-EndedFebruary 3,


January 28,


January 29,2007


2006


2005Principal product line:Softlines


50
%


56
%


56
%Hardlines and seasonal


50
%


44
%


44
%Total


100
%


100
%


100
%   Softlines
    
    fashion and sportswear fabrics, used primarily in the
    construction of garments for the customer seeking a unique,
    fashion forward look;
    special occasion fabrics used to construct evening wear, bridal
    and special occasion outfits;
    craft fabrics used primarily in the construction of quilts,
    craft and seasonal projects for the home;
    juvenile designs for the construction of garments as well as
    blankets and décor accessories;
    special-buy or fabrics representing special values for our
    customer;
    home decorating fabrics and accessories used in home related
    projects such as window treatments, furniture and bed coverings
    (in addition to the in-store assortment, we offer a special
    order capability for additional designs);
    a wide array of notions, which represent items incidental to
    sewing-related projects  including cutting
    implements, threads, zippers, trims, tapes, pins, elastics,
    buttons and ribbons, as well as the patterns necessary for most
    sewing projects; and
    sewing-related accessories including lighting, organizers and
    sewing machines. Our high volume stores offer a wider selection
    of sewing machines through leased departments with third parties
    from whom we receive sublease income.  Hardlines and
    Seasonal
    
    yarn and accessories, as well as needlecraft kits and supplies;
    paper crafting components, such as albums, papers, stickers,
    stamps and books used in the popular home based activities of
    scrapbooking and card making;
    craft materials, including items used for stenciling, jewelry
    making, decorative painting, wall décor, and kids crafting;
    brand-name fine art materials, including items such as pastels,
    water colors, oil paints, acrylics, easels, brushes, paper and
    canvas;
    a comprehensive assortment of books and magazines to provide
    inspiration for our customer; 3




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
    framed art, photo albums and ready-made frames and, in
    superstores, full service in-store framing departments;
    floral products, including artificial flowers, dried flowers and
    artificial plants, sold separately or in ready-made floral
    arrangements and a broad selection of accessories essential for
    floral arranging and wreath making; and
    home décor accessories including baskets, candles and
    accent collections designed to complement our home décor
    fashions.  tm ® ® ®
      Marketing
            Purchasing
   4




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Logistics
      Store
    Operations
  Site Selection.
  Costs of Opening Stores.
  Store Management.
 5




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##### Table of Contents



Traditional


Superstore


Total




Traditional


Superstore


TotalAlabama


1







1


Nebraska


5







5Alaska


4



2



6


Nevada


4



2



6Arizona


10



7



17


New Hampshire


8







8Arkansas


1







1


New Jersey


12



1



13California


74



17



91


New Mexico


6







6Colorado


9



5



14


New York


31



9



40Connecticut


11



2



13


North Carolina


7







7Delaware


2



1



3


North Dakota


4







4Florida


35



17



52


Ohio


42



15



57Georgia


7



4



11


Oklahoma


4







4Idaho


9







9


Oregon


21



3



24Illinois


28



10



38


Pennsylvania


37



8



45Indiana


20



6



26


Rhode Island






1



1Iowa


11







11


South Carolina


2







2Kansas


6



2



8


South Dakota


1







1Kentucky


3







3


Tennessee






4



4Louisiana


5







5


Texas


33



8



41Maine


5







5


Utah


7



3



10Maryland


15



4



19


Vermont


4







4Massachusetts


22



1



23


Virginia


22







22Michigan


29



19



48


Washington


21



10



31Minnesota


14



6



20


West Virginia


5







5Missouri


10



2



12


Wisconsin


14



4



18Montana


7







7


Total


628



173



801     Stores in





TotalStores


Stores


Operation at


Expanded or


SquareFiscal
    Year

Opened


Closed


Year-End


Relocated


Footage2003


3



(43
)


919



6



15,4352004


19



(46
)


892







15,3772005


31



(72
)


851



2



15,4532006


44



(57
)


838



2



16,1982007


26



(63
)


801



1



16,215    6




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##### Table of Contents



Information
    Technology
  point-of-sale point-of-sale point-of-sale look-up,
  point-of-sale point-of-sale
    Status of Product
    or Line of Business
    Trademarks
    Seasonal
    Business
   7




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Customer
    Base
    Backlog of
    Orders
    Competitive
    Conditions
      
    purchasing power;
    ability to support efficient nationwide distribution; and
    the financial resources to execute our strategy going forward.  Research and
    Development
    Environmental
    Disclosure
    Employees
   8




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Foreign
    Operations and Export Sales
    Other Available
    Information
  Form 10-K, Form 10-Q, Form 8-K
  Form 10-K
  Item 1A.
    Risk
    Factors    Economic
    Risks
  Changes in economic conditions could have a material
    adverse effect on our business, revenue and profitability
   9




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If customer interest in fabric and craft products
    declines, our revenues may decline
    Changes in interest rates could adversely impact
    profitability
    External
    Business Risks
  Competition could negatively impact our operations
      Our suppliers may encounter business issues and not meet
    our needs
  agreed-upon
   10




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Our dependence on foreign suppliers subjects us to
    possible delays in receipt of merchandise and to the risks
    involved in foreign operations
      Our business depends on shopping center traffic and our
    ability to identify suitable store locations
      The seasonality of our sales may negatively impact our
    operating results
    Increases in transportation costs due to transportation
    industry challenges and rising fuel costs may negatively impact
    our operating results
   11




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Our business could be negatively impacted by changes in
    the labor market and our cost of doing business could increase
    as a result of changes in federal, state or local
    regulations
      Operational
    Business Risks
  The loss of key executives and failure to attract
    qualified management could limit our growth and negatively
    impact our operations
    Failure to manage inventory effectively will negatively
    impact sales and earnings
      Failure to adequately maintain our perpetual inventory and
    automated replenishment systems
   12




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Inability to provide new and improved product
    selection
      Failure to grow sales may impact operations
    Our failure to manage our new store growth would have a
    negative impact on our operations
    Store specific
    risks
  
    our ability to saturate existing markets and penetrate new
    markets;
    the availability of desirable locations and the negotiation of
    acceptable leases for these sites;
    the availability of management resources in a particular area;
    the timely construction, fixturing, merchandising and hiring and
    training of store personnel;
    the closure of unsuccessful stores may result in the retention
    of liability for expensive leases;  General
    risks
  
    our ability to generate sufficient cash flow from operations;
    the availability of working capital;
    our ability to obtain financing;
    the expansion of our logistics systems to support new stores;
    the maintenance or upgrade of our information processing systems
    and the integration of those systems at new stores;
    a significant portion of our managements time and energy
    may be consumed with issues unrelated to advancing our core
    business strategy, which could result in a deterioration of our
    operating results; 13




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
    our suppliers may be unable to meet the increased demand of
    additional stores in a timely manner; and
    general economic conditions and specific retail economic
    conditions.    The loss of, or disruption in, or our inability to
    efficiently operate our distribution network could have a
    negative impact on our business
      The efficient operation of our business is dependent on
    our information systems. Our failure to maintain and upgrade our
    management information systems could compromise our competitive
    position
        Our existing indebtedness could restrict our operations,
    making us more vulnerable to adverse economic conditions
    
    make it more difficult for us to satisfy our other obligations; 14




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##### Table of Contents




    reduce the availability of our cash flow from operations to fund
    working capital, capital expenditures, acquisitions and other
    general corporate requirements because we will have to dedicate
    a significant portion of our cash flow from operations to
    payments of our indebtedness;
    limit our ability to borrow funds to pay for future working
    capital, capital expenditures, acquisitions and other general
    corporate requirements;
    limit our flexibility in planning for, or reacting to, changes
    in our business and the industry in which we operate;
    place us at a disadvantage compared to our competitors that have
    less debt; and
    make us more vulnerable to negative changes in economic and
    industry conditions.    We may not be able to finance future needs or adapt our
    business plan to changes because of restrictions placed on us by
    our senior bank credit facility and indenture
      We could incur more debt
    Failure to adequately maintain the security of our
    electronic and other confidential information could materially
    adversely affect our financial condition and results of
    operations
   15




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##### Table of Contents



Failure to comply with various regulations may result in
    damage to our business
      Other Factors
    Item 1B.
    Unresolved Staff
    Comments    Item 2.
    Properties    80-acre
    105-acre
   16




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##### Table of Contents



Number ofFiscal Year Lease
    Terms Expire

Store
    LeasesMonth-to-month


252008


542009


432010


212011


412012


37Thereafter


594Total


815   Item 3.
    Legal
    Proceedings    Item 4.
    Submission of
    Matters to a Vote of Security Holders    Executive
    Officers of the Registrant
  Regulation S-K.
    Name

Age

PositionDarrell Webb


49


Chairman of the Board, President
    and Chief Executive OfficerDavid Holmberg


48


Executive Vice President,
    OperationsJames Kerr


44


Executive Vice President, Chief
    Financial OfficerTravis Smith


34


Executive Vice President,
    Merchandising and Marketing   Darrell Webb
  David Holmberg
 17




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##### Table of Contents



James Kerr
  Travis Smith
  PART II
  Item 5.
    Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities      Common
    SharesHigh


LowQuarter Ended Fiscal
    2007:February 3, 2007

$
26.14


$
17.37October 28, 2006


18.31



13.51July 29, 2006


16.80



12.09April 29, 2006


14.19



11.24Quarter Ended Fiscal
    2006:January 28, 2006

$
15.76


$
10.98October 29, 2005


28.00



14.01July 30, 2005


28.80



24.02April 30, 2005


30.69



25.02       Purchases of
    Equity Securities by Jo-Ann Stores, Inc.Total Number
    of


Maximum Number
    ofShares Purchased
    as


Shares that May
    YetTotal Number


Average


Part of
    Publicly


Be Purchased
    Underof Shares


Price Paid


Announced Plans
    or


the Plans orPurchased


per
    Share


Programs


ProgramsOctober 29 
    November 25, 2006


426


$
18.19



906,442



1,243,558November 26 
    December 30, 2006










906,442



1,243,558December 31, 2006 
    February 3, 2007










906,442



1,243,558Total


426


$
18.19



906,442



1,243,558    18




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Managements Discussion and
    Analysis of Financial Condition and Results of Operations,
  Fiscal Year-Ended
    (a)February 3,


January 28,


January 29,


January 31,


February 1,2007


2006


2005


2004


2003(Dollars in
    millions, except per share data)Operating Results:Net sales

$
1,850.6


$
1,882.8


$
1,812.4


$
1,734.1


$
1,682.0Total net sales percentage
    (decrease) increase


(1.7
)%


3.9
%


4.5
%


3.1
%


7.1
%Same-store sales percentage
    (decrease)
    increase (b)


(5.9
)%


(0.8
)%


3.2
%


3.6
%


8.4
%Gross margin


859.8



859.2



862.1



810.6



777.5Selling, general and administrative
    expenses
    (c)


790.5



774.0



708.5



671.2



633.4Store pre-opening and closing costs


11.1



23.4



18.5



13.3



6.3Depreciation and amortization


49.2



42.2



43.0



39.0



37.9Debt repurchase and share
    reclassification
    expenses(d)










4.2



5.5



1.9Goodwill impairment






27.1











Operating profit (loss)


9.0



(7.5
)


87.9



81.6



98.0Operating profit (loss) as a
    percent of net sales


0.5
%


(0.4
)%


4.8
%


4.7
%


5.8
%Interest expense


15.6



12.8



13.7



16.5



24.7(Loss) income before cumulative
    effect of accounting change


(2.9
)


(23.0
)


46.2



40.1



45.4Cumulative effect of change in
    accounting principle, net of tax
    (c)


1.0















Net (loss) income

$
(1.9
)

$
(23.0
)

$
46.2


$
40.1


$
45.4Net (loss) income as a percent of
    net sales


(0.1
)%


(1.2
)%


2.5
%


2.3
%


2.7
%Per Share Data
    (e):(Loss) income per common
    share  diluted:(Loss) income before cumulative
    effect of accounting change

$
(0.12
)

$
(1.01
)

$
2.02


$
1.82


$
2.10Cumulative effect of change in
    accounting principle


0.04















Net (loss) income 
    diluted

$
(0.08
)

$
(1.01
)

$
2.02


$
1.82


$
2.10Weighted average shares
    outstanding  diluted (000s)


23,519



22,716



22,887



22,003



21,632Financial Position:Cash and cash equivalents

$
18.4


$
17.9


$
79.6


$
17.4


$
63.2Inventories


453.4



514.7



439.7



404.6



363.1Inventory turnover


2.0
x


2.1
x


2.3
x


2.4
x


2.5
xCurrent assets


534.2



605.8



562.9



467.4



468.6Property, equipment and leasehold
    improvements, net


311.8



331.7



238.0



218.4



203.2Total assets


856.7



946.8



839.3



719.8



714.3Current liabilities


222.3



240.7



258.8



198.2



205.8Long-term debt


125.3



203.7



100.0



113.7



162.9Shareholders equity


409.8



399.4



408.9



340.8



285.0Long-term debt to total
    capitalization


23.4
%


33.8
%


19.7
%


25.0
%


36.4
%Long-term debt to total
    capitalization, net of cash


20.7
%


31.7
%


4.8
%


22.0
%


25.9
%  19




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##### Table of Contents



Item 6.
    Selected
    Financial Data (Continued)  Fiscal Year-Ended
    (a)February 3,


January 28,


January 29,


January 31,


February 1,2007


2006


2005


2004


2003(Dollars in
    millions, except per share data)Per Share Data
    (e):Book value
    (f)

$
17.18


$
17.09


$
18.10


$
15.61


$
13.52Shares outstanding, net of
    treasury shares (000s)


23,857



23,375



22,585



21,828



21,079Other Financial
    Information:Capital expenditures:Cash

$
44.6


$
118.9


$
58.2


$
52.2


$
22.7Cash  landlord
    reimbursement
    (g)


13.5



23.9



8.9



5.4



0.5Total capital expenditures

$
58.1


$
142.8


$
67.1


$
57.6


$
23.2Store Count:Traditional stores


628



684



737



806



847Superstores


173



154



114



86



72Total


801



838



851



892



919Store Square Footage
    (000s)
    (h)Traditional stores


9,368



10,023



10,721



11,646



12,165Superstores


6,847



6,175



4,732



3,731



3,270Total


16,215



16,198



15,453



15,377



15,435     (a)
    
    All years include 52 weeks
    except for the fiscal year-ended February 3, 2007, which
    includes 53 weeks.(b)
    
    Same-store sales are defined as net
    sales from stores that have been open one year or more. Net
    sales are included in the same-store sales calculation on the
    first day of the first month following the one-year anniversary
    of a stores opening. In conjunction with the expansion or
    relocation of our stores, the net sales results from these
    stores are excluded from the same-store sales calculation until
    the first day of the first month following the one-year
    anniversary of its expansion or relocation. Further, in a
    53-week
    year, net sales of the first 52 weeks are compared to the
    comparable 52 weeks of the prior period.(c)
    
    Includes stock-based compensation
    expense which includes the expensing of stock options under
    Statement of Financial Accounting Standards (SFAS)
    No. 123 Accounting for Stock-Based Compensation
    Expense, which we adopted in the first quarter of fiscal
    2004, and the amortization of the fair value of restricted stock
    granted to employees. Effective January 29, 2006, we
    adopted SFAS No. 123 (revised 2004), Share-Based
    Payment, (SFAS No. 123R), which
    replaces SFAS No. 123, using the modified prospective
    method. SFAS No. 123R requires stock-based
    compensation to be measured using the fair value method of
    accounting. The adoption of the new standard resulted in a
    cumulative after-tax adjustment related to estimated
    forfeitures. See Managements Discussion and Analysis
    of Financial Condition and Results of Operations,
    Note 1  Significant Accounting
    Policies and Note 7  Stock-Based
    Compensation contained in the notes to consolidated
    financial statements.(d)
    
    Debt repurchase and share
    reclassification expenses include expenses related to the early
    extinguishment of debt and costs associated with the share
    reclassification of our former Class A and Class B
    common shares into a single class of common stock that was
    approved by shareholders on November 4, 2003. See
    Note 5  Financing contained in the
    notes to consolidated financial statements.(e)
    
    Shares outstanding, as well as
    average basic and diluted shares outstanding used to calculate
    earnings per share, reflect the impact of the increased shares
    outstanding as a result of the share reclassification that was
    approved by shareholders on November 4, 2003. Per share
    data reflects the impact of this share reclassification.(f)
    
    Book value is calculated by
    dividing shareholders equity by shares outstanding, net of
    treasury shares.(g)
    
    Capital expenditures reimbursed by
    the landlord represent the cost of assets acquired through the
    utilization of landlord lease incentives.(h)
    
    Total store square footage includes
    selling floor space and inventory storage areas. 20




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
  Overview
  Jo-Ann Fabric and Craft Jo-Ann
        
    Net sales.  Net sales including net sales from
    stores open one year or more (same-store sales) by
    our two store formats, traditional stores and superstores. Net
    sales measure our overall sales growth and same-store sales
    measure whether our existing stores continue to grow their sales
    volume. We also closely monitor per transaction average ticket
    value and customer transactions, both in total and by store
    format. These indicators help measure our effectiveness in
    attracting customers into our stores and the effectiveness of
    our product assortment, promotions and service on sales. We also
    measure our sales per square foot performance in both of our
    store formats and compare them with our immediate competitors.
    Gross margins.  Gross margin is used by our
    management to evaluate merchandising and operation
    effectiveness. Merchandise selection and future decisions are,
    in part, based on gross margin performance. 21




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##### Table of Contents




    Selling, general and administrative expense as a rate to
    sales.  We also compare operating margins to those
    of our competitors.
    Inventory turnover.  We closely monitor our
    inventory investment, which is our single largest invested
    asset. Increasing inventory turnover is critical to improving
    our working capital position.
    Debt to total capitalization.  We monitor our
    debt balances and leverage as a percent of total capitalization.
    We also monitor current and projected excess availability, as
    defined under our senior bank credit facility, in order to
    ensure that adequate flexibility is available to execute our
    operating plans.  Executive
    Overview of Fiscal 2007
  Qtr 1


Qtr 2


Qtr 3


Qtr 4


TotalNet sales

$
424.7


$
363.2


$
461.9


$
600.8


$
1,850.6Same-store sales percent change


(3.9
)%


(8.4
)%


(5.4
)%


(6.0
)%


(5.9
)%Gross margin

$
198.0


$
172.3


$
219.1


$
270.4


$
859.8Gross margin percent


46.6
%


47.4
%


47.4
%


45.0
%


46.5
%Gross margin basis point change
    from prior year


(210
)


(80
)


180



310



90Selling, general and
    administrative expenses

$
189.7


$
186.9


$
198.5


$
215.4


$
790.5SG&A percent to sales


44.7
%


51.5
%


43.0
%


35.9
%


42.7
%SG&A basis point change from
    prior year


180



550



100



(20
)


160Net (loss) income

$
(6.6
)

$
(21.2
)

$
0.1


$
25.8


$
(1.9
)Net (loss) income percent to sales


(1.6
)%


(5.8
)%


0.0
%


4.3
%


(0.1
)%Net (loss) income basis point
    change from prior year


(260
)


(450
)


90



730



110     
    Net sales decreased 1.7 percent to $1.851 billion.
    Same-store sales decreased 5.9 percent versus a
    0.8 percent same-store sales decrease for last year. The
    decline in same-store sales was related to a decrease in
    customer transactions, as average ticket was consistent with the
    prior year.
    Our gross margin rate, as a percentage of net sales, increased
    by 90 basis points, to 46.5 percent of net sales in fiscal
    2007 versus 45.6 percent for fiscal 2006. This increase was
    due to a less promotional pricing strategy, due in part to
    better sell-through on our seasonal goods and reduced sales of
    clearance inventory primarily in the second half of the year.
    Our selling, general and administrative expenses
    (SG&A) as a percentage of net sales, excluding
    those expenses separately identified in the statement of
    operations, increased 160 basis points from
    41.1 percent last year to 42.7 percent this year. The
    reduced leverage is due to negative same-store sales
    performance, increases in logistics costs related to the opening
    of our new distribution center, and increases in fixed store
    expenses, primarily caused by costs related to the new
    superstores and the larger
    year-over-year
    superstore base.   22




---



##### Table of Contents




    Store pre-opening and closing costs decreased $12.3 million
    to $11.1 million in fiscal 2007, due to the amount of real
    estate activity
    year-over-year
    and the recognition of $1.4 million in income related to
    the early termination of a lease.
    As of the beginning of the first quarter of fiscal 2007, we
    adopted Statement of Financial Accounting Standards No. 123
    (revised 2004), Share-Based Payment,(SFAS No. 123R).
    SFAS No. 123R, among other things, changes the method
    of accounting for forfeited share-based payment awards. As a
    result, during the first quarter of fiscal 2007, we recorded
    $1.0 million, net of tax, as a cumulative effect of the
    change in accounting principle which reduced previously
    recognized expense for estimated forfeitures on existing awards
    which have not yet vested.
    Net loss for the year was $1.9 million, or $0.08 loss per
    diluted share, compared with a net loss of $23.0 million,
    or $1.01 loss per diluted share in fiscal 2006. Results for
    fiscal 2006 include a non-cash and non-tax deductible charge of
    $27.1 million for goodwill impairment.
    During the third quarter of fiscal 2007, we completed a
    sale-leaseback transaction of our distribution center located in
    Visalia, California. We sold the facility to an independent
    third party for approximately $24.7 million, and have
    leased the facility back from the purchaser. The initial term of
    the lease is for 20 years and will be automatically renewed
    for eight consecutive five-year renewal terms unless we provide
    notice of non-renewal. A gain of $1.5 million on the sale
    of the facility was deferred and is being amortized as a
    reduction of rent expense over the initial term of 20 years.    Recent
    Developments and Business Update
      
    We reduced inventory by $61.3 million or 12 percent as
    compared to the prior year.
    We reduced our debt level by $78.4 million compared to the
    prior year.
    We also initiated the Merchandise Assortment Project or
    MAP during the first half of the year. This project
    involved substantial changes in product assortments,
    plan-o-grams and store layouts, and expanded our selection of
    craft products.
    Gross margin for the fourth quarter increased 310 basis
    points. On a full-year basis, gross margin increased
    90 basis points.
    We reviewed all areas of our business for opportunities to
    reduce and control expenses. During fiscal 2007, we continued
    our workforce reduction of certain administrative personnel.   23




---



##### Table of Contents




    Improve the customer shopping experience.  We
    are committed to improving the customer shopping experience by
    removing excess inventory and clutter from our stores, raising
    expectations for store cleanliness, improving our in-stock on
    basic merchandise and improving our customer service.
    Enhance our marketing and merchandising
    offers.  We will drive sales growth by enhancing
    our marketing and merchandising offers. Marketing enhancements
    include changes in the appearance, content and distribution of
    our advertising. We plan on rolling out new vendor programs,
    such as American Greetings products and Singer sewing machines.
    We will implement new plan-o-gram processes in order to offer
    compelling and fresh product assortments that also inspire
    customers with displays of finished sewing and craft projects
    throughout the stores. We will also make tighter buys on fashion
    and promotional items for faster turns and improved margins.
    Refine our new store and remodel programs.  We
    will refine our new store programs in order to generate better
    performance from new superstores. In addition, we will refine
    our remodel programs in order to generate better performance
    from our traditional stores and older superstores.    Results of
    Operations
    Fiscal
    Year-EndedFeb 3,
    2007


Jan 28,
    2006


Jan 29,
    2005Net sales


100.0
%


100.0
%


100.0
%Gross margin


46.5
%


45.6
%


47.6
%Selling, general and
    administrative expenses


42.7
%


41.1
%


39.2
%Store pre-opening and closing costs


0.6
%


1.2
%


1.0
%Depreciation and amortization


2.7
%


2.3
%


2.4
%Debt repurchase expenses










0.2
%Goodwill impairment






1.4
%


Operating profit (loss)


0.5
%


(0.4
)%


4.8
%   Comparison of the
    53 Weeks Ended February 3, 2007 and the 52 Weeks Ended
    January 28, 2006
  Net sales.
 24




---



##### Table of Contents



Gross margin.
  Selling, general and administrative
    expenses. year-over-year
    Store pre-opening and closing
    costs.
  year-over-year
 25




---



##### Table of Contents



Depreciation and amortization.
  Operating profit (loss).
  Interest expense.
  Income taxes.
  Cumulative effect of change in accounting
    principle.
  Comparison of
    Fiscal 2006 to Fiscal 2005
  Net sales.
       26




---



##### Table of Contents



Gross margin.
  Selling, general and administrative
    expenses. year-over-year
      Depreciation and amortization.
  Store pre-opening and closing
    costs.
  year-over-year.
 27




---



##### Table of Contents



year-over-year
  Goodwill impairment.
  Operating (loss) profit.
  Interest expense.
  Income taxes.
  Store Closing
    Charges
  Note 1  Significant
    Accounting Policies,
  Store pre-opening and closing
    costs
    Stock-Based
    Compensation
  pay-for-performance
 28




---



##### Table of Contents



Liquidity and
    Capital Resources
      2007


2006


2005Net cash provided by (used for)
    operating activities

$
105.8


$
(31.5
)

$
141.9Net cash used for investing
    activities


(33.4
)


(142.8
)


(67.1
)Net cash (used for) provided by
    financing activities


(71.9
)


112.6



(12.6
)Net increase (decrease) in cash
    and cash equivalents

$
0.5


$
(61.7
)

$
62.2Ending cash and cash equivalents

$
18.4


$
17.9


$
79.6   Net Cash Provided
    By (Used For) Operating Activities
    year-over-year.
  Capital Expenditures
     29




---



##### Table of Contents



Net Cash Used For
    Investing Activities
  Capital
    Expenditures.
    Capital
    Expenditures
    2008Outlook


2007


2006


2005Cash

$
32-$38


$
44.6


$
118.9


$
58.2Cash 
    landlord-reimbursed


7.0



13.5



23.9



8.9Total

$
39-$45


$
58.1


$
142.8


$
67.1           Sale-Leaseback
    Transaction
   30




---



##### Table of Contents



Net Cash (Used
    For) Provided By Financing Activities
    Sources of Liquidity
        Common Share
    Repurchases
    Sources of
    Liquidity
     31




---



##### Table of Contents



Senior Bank Credit Facility.
  sub-limit
       32




---



##### Table of Contents



Senior Subordinated Notes.
    /
    Off-Balance Sheet
    Transactions
    Contractual
    Obligations and Commitments
    Payments Due by
    Period
    (1)Less than








AfterTotal


1 Year


1-3
    Years


4-5
    Years


5 Years7.5 percent senior
    subordinated notes

$
100.0


$



$



$



$
100.07.5 percent senior
    subordinated notes
    interest(1)


41.3



7.5



22.5



11.3



Credit Facility 
    revolving facility


25.3











25.3



Letters of
    credit(2)


52.4



52.4











Purchase
    commitments(3)


23.5



5.1



11.8



6.6



Operating leases


845.9



146.0



235.7



176.7



287.5Total Contractual Cash Obligations

$
1,088.4


$
211.0


$
270.0


$
219.9


$
387.5     (1)
    
    Interest is included as a contractual obligation on the
    7.5 percent Notes only. The calculation of interest on the
    Credit Facility is dependent on the average borrowings during
    the year and a variable interest rate. See Liquidity
    and Capital Resources  Sources of Liquidityfor further discussion of the Credit Facility.(2)
    
    Includes commercial letters of credit of $23.2 million and
    $29.2 million of standby letters of credit.(3)
    
    Purchase commitments include legally binding contracts such as
    firm commitments for significant inventory purchases. Purchase
    orders that are not binding agreements are excluded from the
    table. 33




---



##### Table of Contents



Seasonality and
    Inflation
      Fiscal
    2007



Fiscal
    2006Qtr 1


Qtr 2


Qtr 3


Qtr 4



Qtr 1


Qtr 2


Qtr 3


Qtr 4Net sales

$
424.7


$
363.2


$
461.9


$
600.8



$
420.7


$
383.8


$
474.2


$
604.1Same-store sales percentage change


(3.9
)%


(8.4
)%


(5.4
)%


(6.0
)%



0.6
%


(0.5
)%


0.7
%


(3.0
)%Gross margin

$
198.0


$
172.3


$
219.1


$
270.4



$
204.8


$
184.8


$
216.3


$
253.3Gross margin percent to sales


46.6
%


47.4
%


47.4
%


45.0
%



48.7
%


48.2
%


45.6
%


41.9
%Operating (loss) profit

$
(8.8
)

$
(29.5
)

$
5.0


$
42.3



$
8.8


$
(5.7
)

$
(1.7
)

$
(8.9
)Operating (loss) profit percent to
    sales


(2.1
)%


(8.1
)%


1.1
%


7.0
%



2.1
%


(1.5
)%


(0.4
)%


(1.5
)%Net (loss) income

$
(6.6
)

$
(21.2
)

$
0.1


$
25.8



$
4.2


$
(5.1
)

$
(4.1
)

$
(18.0
)Inventories


463.0



511.3



535.8



453.4




446.4



574.0



654.1



514.7Long-term debt


190.0



225.0



200.3



125.3




100.0



174.8



290.0



203.7     Critical
    Accounting Policies and Estimates
  and/or
  Inventory
    Valuation
  first-in,
   34




---



##### Table of Contents



Vendor
    Allowances
  02-16,
  Gift Cards and
    Gift Card Breakage
    Valuation of
    Long-Lived Assets
        Store Closing
    Costs
   35




---



##### Table of Contents



Accrued
    Expenses
    Operating
    Leases
      Income
    Taxes
      Recent Accounting
    Pronouncements
    Statement of
    Financial Accounting Standards No. 157, Fair Value
    Measurements
   36




---



##### Table of Contents



FASB
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes  An Interpretation of FASB Statement
    No. 109
    Cautionary
    Statement Concerning Forward-Looking Statements
   37




---



##### Table of Contents



Item 7A.
    Quantitative and
    Qualitative Disclosures About Market Risk       38




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  Jo-Ann Stores,
    Inc.
  Index to
    Consolidated Financial Statements
  
  PageReport of
    Independent Registered Public Accounting Firm


40Consolidated
    Balance Sheets as of February 3, 2007 and January 28,
    2006


41Consolidated
    Statements of Operations for each of the three fiscal years in
    the period ended February 3, 2007


42Consolidated
    Statements of Cash Flows for each of the three fiscal years in
    the period ended February 3, 2007


43Consolidated
    Statements of Shareholders Equity for each of the three
    fiscal years in the period ended February 3, 2007


44Notes to
    Consolidated Financial Statements


45EX-10.8EX-10.9EX-10.10EX-10.16EX-21EX-23EX-24EX-31.1EX-31.2EX-32.1   39




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm              
    40




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Consolidated
    Balance Sheets
  February 3,


January 28,2007


2006(Dollars in
    millions, except share and per share data)AssetsCurrent assets:Cash and cash equivalents

$
18.4


$
17.9Inventories


453.4



514.7Deferred income taxes


32.0



38.0Prepaid expenses and other current
    assets


30.4



35.2Total current assets


534.2



605.8Property, equipment and leasehold
    improvements, net


311.8



331.7Other assets


10.7



9.3Total assets

$
856.7


$
946.8Liabilities and
    Shareholders EquityCurrent liabilities:Accounts payable

$
147.5


$
146.6Accrued expenses


74.8



94.1Total current liabilities


222.3



240.7Long-term debt


125.3



203.7Deferred income taxes


14.2



23.2Lease obligations and other
    long-term liabilities


85.1



79.8Commitments and contingencies
    (Note 9)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 27,400,347
    and 27,050,507, respectively


1.4



1.4Additional paid-in capital


176.9



165.4Retained earnings


274.7



276.6453.0



443.4Treasury stock, at cost,
    3,542,885 shares and 3,675,439 shares, respectively


(43.2
)


(44.0
)Total shareholders equity


409.8



399.4Total liabilities and
    shareholders equity

$
856.7


$
946.8   See notes to consolidated financial statements
 41




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Consolidated
    Statements of Operations
  Fiscal
    Year-EndedFebruary 3,


January 28,


January 29,2007


2006


2005(Dollars in
    millions,except earnings
    per share data)Net sales

$
1,850.6


$
1,882.8


$
1,812.4Cost of sales (exclusive of
    depreciation and amortization shown separately below)


990.8



1,023.6



950.3Gross margin


859.8



859.2



862.1Selling, general and
    administrative expenses


790.5



774.0



708.5Store pre-opening and closing costs


11.1



23.4



18.5Depreciation and amortization


49.2



42.2



43.0Debt repurchase expenses










4.2Goodwill impairment






27.1



Operating profit (loss)


9.0



(7.5
)


87.9Interest expense, net


15.6



12.8



13.7(Loss) income before income taxes


(6.6
)


(20.3
)


74.2Income tax (benefit) provision


(3.7
)


2.7



28.0(Loss) income before cumulative
    effect of accounting change


(2.9
)


(23.0
)


46.2Cumulative effect of change in
    accounting principle, net of tax


1.0







Net (loss) income

$
(1.9
)

$
(23.0
)

$
46.2(Loss) income per common
    share  basic:(Loss) income before cumulative
    effect of accounting change

$
(0.12
)

$
(1.01
)

$
2.09Cumulative effect of change in
    accounting principle


0.04







Net (loss) income

$
(0.08
)

$
(1.01
)

$
2.09(Loss) income per common
    share  diluted:(Loss) income before cumulative
    effect of accounting change

$
(0.12
)

$
(1.01
)

$
2.02Cumulative effect of change in
    accounting principle


0.04







Net (loss) income

$
(0.08
)

$
(1.01
)

$
2.02   See notes to consolidated financial statements
 42




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Consolidated
    Statements of Cash Flows
  Fiscal
    Year-EndedFebruary 3,


January 28,


January 29,2007


2006


2005(Dollars in
    millions)Net cash flows from operating
    activities:Net (loss) income

$
(1.9
)

$
(23.0
)

$
46.2Adjustments to reconcile net
    (loss) income to net cash provided by (used for) operating
    activities:Depreciation and amortization


49.2



42.2



43.0Deferred income taxes


(3.0
)


(21.1
)


(6.3
)Stock-based compensation expense


6.9



2.8



7.7Cumulative effect of change in
    accounting principle


(1.0
)






Tax benefit on stock-based
    compensation plan awards


0.3



1.8



4.9Amortization of deferred financing
    costs


0.9



0.9



2.0Loss on disposal and impairment of
    fixed assets


5.6



6.9



4.4Loss associated with purchase of
    senior subordinated notes










4.2Goodwill impairment






27.1



Changes in operating assets and
    liabilities:Decrease (increase) in inventories


61.3



(75.0
)


(35.1
)Decrease (increase) in prepaid
    expenses and other current assets


4.8



(12.9
)


1.2Increase (decrease) in accounts
    payable


0.9



(20.6
)


45.2(Decrease) increase in accrued
    expenses


(19.9
)


2.5



15.4Increase in lease obligations, net


3.6



34.8



8.9Increase in other long-term
    liabilities


0.2



1.0



0.9Other, net


(2.1
)


1.1



(0.7
)Net cash provided by (used for)
    operating activities


105.8



(31.5
)


141.9Net cash flows used for investing
    activities:Capital expenditures


(58.1
)


(142.8
)


(67.1
)Net proceeds from sale-leaseback
    transaction


24.7







Net cash used for investing
    activities


(33.4
)


(142.8
)


(67.1
)Net cash flows (used for) provided
    by financing activities:Proceeds from issuance of
    7.5% senior subordinated notes, net










97.4Purchase of
    103/8% senior
    subordinated notes










(66.6
)Net change in revolving credit
    facility


(78.4
)


103.7



(49.3
)Proceeds from stock-based
    compensation plans


5.2



7.9



10.0Other, net


1.3



1.0



(4.1
)Net cash (used for) provided by
    financing activities


(71.9
)


112.6



(12.6
)Net increase (decrease) in cash
    and cash equivalents


0.5



(61.7
)


62.2Cash and cash equivalents at
    beginning of year


17.9



79.6



17.4Cash and cash equivalents at end
    of year

$
18.4


$
17.9


$
79.6Supplemental disclosures of cash
    flow information:Cash paid during the year for:Interest

$
15.2


$
12.8


$
11.2Income taxes, net of refunds


20.1



26.9



23.6   See notes to consolidated financial statements
 43




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Consolidated
    Statements of Shareholders Equity
  Common











AccumulatedNet






Stock


Additional








Other


TotalCommon


Treasury



Stated


Paid-In


Treasury


Retained


Comprehen-


ShareholdersShares


Shares



Value


Capital


Stock


Earnings


sive
    Loss


Equity(Shares in
    thousands)









(Dollars in
    millions)Balance, January 31,
    2004


21,828



3,775



$
1.3


$
129.0


$
(41.3
)

$
253.4


$
(1.6
)

$
340.8Net income























46.2







46.2Change in fair value of
    derivatives, net of $1.0 million tax provision



























1.6



1.6Total comprehensive income































47.8Exercise of stock options


768



(119
)







7.0



0.6











7.6Tax benefit on equity compensation















4.9















4.9Stock-based compensation


(36
)











7.7















7.7Purchase of common stock


(119
)


119












(3.3
)










(3.3
)Issuance of treasury shares


38



(38
)







0.8



0.2











1.0Issuance of common
    stock  Associate Stock Ownership Plan


106












2.4















2.4Balance, January 29,
    2005


22,585



3,737




1.3



151.8



(43.8
)


299.6







408.9Net loss























(23.0
)






(23.0
)Total comprehensive loss































(23.0
)Exercise of stock options


630








0.1



5.4















5.5Tax benefit on equity compensation















1.8















1.8Stock-based compensation


(35
)











2.8















2.8Purchase of common stock


(27
)


27












(0.7
)










(0.7
)Issuance of treasury shares


89



(89
)







1.2



0.5











1.7Issuance of common
    stock  Associate Stock Ownership Plan


133












2.4















2.4Balance, January 28,
    2006


23,375



3,675




1.4



165.4



(44.0
)


276.6







399.4Net loss























(1.9
)






(1.9
)Total comprehensive loss































(1.9
)Exercise of stock options


223



(29
)







2.8



0.2











3.0Tax benefit on equity compensation















0.3















0.3Stock-based compensation


(42
)











6.9















6.9Purchase of common stock


(8
)


8












(0.1
)










(0.1
)Issuance of treasury shares


111



(111
)







0.9



0.7











1.6Issuance of common
    stock  Associate Stock Ownership Plan


198












2.2















2.2Cumulative effect of change in
    accounting principle















(1.6
)














(1.6
)Balance, February 3,
    2007


23,857



3,543



$
1.4


$
176.9


$
(43.2
)

$
274.7


$



$
409.8   See notes to consolidated financial statements
 44




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes
    to Consolidated Financial Statements
   Note 1 
    Significant Accounting Policies
  Nature of
    Operations
      Basis of
    Presentation
    Use of
    Estimates
    Fiscal
    Year
  53-week
  Cash and Cash
    Equivalents
    Inventories
  first-in,
   45




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
     Property,
    Equipment and Leasehold Improvements
      Fiscal
    Year2007


2006(Dollars in
    millions)Land and buildings

$
66.5


$
62.2Furniture, fixtures and equipment


436.6



385.5Leasehold improvements


140.8



125.5Construction in progress


12.2



57.9656.1



631.1Less accumulated depreciation and
    amortization


(344.3
)


(299.4
)Property, equipment and leasehold
    improvements, net

$
311.8


$
331.7     Software
    Development
    Impairment of
    Long-Lived Assets
   46




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
    Store Pre-Opening
    and Closing Costs
      Fiscal
    Year-Ended2007


2006


2005(Dollars in
    millions)Store pre-opening costs

$
5.0


$
13.0


$
9.6Store closing costs


6.1



10.4



8.9$
11.1


$
23.4


$
18.5   Accrued
    Expenses
    Fiscal
    Year2007


2006(Dollars in
    millions)Accrued taxes

$
9.1


$
28.4Accrued compensation


24.4



18.7Accrued insurance-related reserves


22.8



20.2Other accrued expenses


18.5



26.8$
74.8


$
94.1  47




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
  Financial
    Instruments
      Income
    Taxes
      Revenue
    Recognition
     48




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
     Cost of
    Sales
    02-16,
  Operating
    Leases
      Advertising
    Costs
   49




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
   Earnings Per
    Share
    Fiscal
    Year-Ended2007


2006


2005(Dollars in
    millions, except per share data)(Loss) income before cumulative
    effect of accounting change

$
(2.9
)

$
(23.0
)

$
46.2Cumulative effect of change in
    accounting principle, net of tax


1.0







Net (loss) income

$
(1.9
)

$
(23.0
)

$
46.2Weighted average shares
    outstanding (shares in thousands):Basic


23,519



22,716



22,155Incremental shares from assumed
    exercise of stock options










624Incremental restricted shares










108Diluted


23,519



22,716



22,887(Loss) income per common
    share  basic:(Loss) income before cumulative
    effect of accounting change

$
(0.12
)

$
(1.01
)

$
2.09Cumulative effect of change in
    accounting principle


0.04







Net (loss) income per common share

$
(0.08
)

$
(1.01
)

$
2.09(Loss) income per common
    share  diluted:(Loss) income before cumulative
    effect of accounting change

$
(0.12
)

$
(1.01
)

$
2.02Cumulative effect of change in
    accounting principle


0.04







Net (loss) income per common share

$
(0.08
)

$
(1.01
)

$
2.02     Stock-Based
    Compensation
     50




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
         Fiscal
    Year-Ended2007


2006


2005(Dollars in
    millions)Stock option compensation
    expense(a)

$
3.3


$
2.5


$
3.4Restricted stock award amortization


3.6



0.3



4.3$
6.9


$
2.8


$
7.7     (a)
    
    Included within stock option compensation expense is expense
    related to the employee stock purchase plan (the Associate Stock
    Ownership Plan or ASOP). The associated expense is
    not significant.        Fiscal
    Year-Ended2007

2006

2005Weighted average fair value of
    options granted

$5.69

$6.64

$14.16Expected volatility of underlying
    stock

.418 to .584

.513 to .568

.594 to .653Risk-free interest rates

4.2% to 5.2%

3.5% to 4.4%

2.4% to 3.7%Expected life

2.2 to 5.2 years

4 years

4 yearsExpected life 
    Associate Stock Ownership Plan

6 months

6 months

6 months    51




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant Accounting Policies (Continued)
   Recent Accounting
    Pronouncements
    Statement of
    Financial Accounting Standards No. 157, Fair Value
    Measurements
    FASB
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes  An Interpretation of FASB Statement
    No. 109
    Note 2 
    Goodwill
     Note 3 
    Store Closings
    52




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 3 
    Store Closings (Continued)
  Fiscal
    Year-Ended2007


2006


2005(Dollars in
    millions)Store Closing Charges:Non-cancelable lease obligations

$
0.7


$
2.3


$
1.4Asset related charges


1.5



3.9



3.8Other costs


3.9



4.2



3.7Total

$
6.1


$
10.4


$
8.9           Note 4 
    Income Taxes
    Fiscal
    Year-Ended2007


2006


2005Current:Federal

$
(3.3
)

$
20.4


$
30.7State and local


2.6



3.4



3.6(0.7
)


23.8



34.3Deferred


(3.0
)


(21.1
)


(6.3
)Income tax (benefit) provision

$
(3.7
)

$
2.7


$
28.0     Fiscal
    Year-Ended2007


2006


2005Federal income tax at the
    statutory rate

$
(2.3
)

$
(7.1
)

$
26.0Effect of:Non-deductible goodwill impairment






9.5



State and local taxes


0.4



0.3



2.4Settlement of federal tax
    liabilities from prior years


(1.1
)






Other, net


(0.7
)






(0.4
)Income tax (benefit) provision

$
(3.7
)

$
2.7


$
28.0  53




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 4 
    Income Taxes (Continued)
    Fiscal YearAsset/(Liability)2007


2006CurrentDeferred tax assets:Inventory items

$
15.1


$
23.8Lease obligations


0.9



0.7Employee benefits


8.9



9.1Other


7.1



4.4Net current deferred tax asset

$
32.0


$
38.0Non-currentDeferred tax assets:Lease obligations

$
30.5


$
29.2Equity investment


2.5



2.5Employee benefits


6.7



3.1State net operating loss
    carryforwards


1.1



0.3Other


2.4



Valuation allowances


(2.7
)


(2.7
)40.5



32.4Deferred tax liabilities:Depreciation


(54.1
)


(55.1
)Other


(0.6
)


(0.5
)(54.7
)


(55.6
)Net non-current deferred tax
    liability

$
(14.2
)

$
(23.2
)          54




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 4 
    Income Taxes (Continued)
    Note 5 
    Financing
    Fiscal
    Year2007


2006Credit Facility

$
25.3


$
103.77.5 percent senior
    subordinated notes


100.0



100.0Total Long-term debt

$
125.3


$
203.7   Secured Credit
    Facility
    sub-limit
     55




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 5 
    Financing (Continued)
     Senior
    Subordinated Notes
    and/or
      (Dollars in
    millions)2008

$
2009


2010


25.32011


2012


Thereafter

$
100.0    Note 6 
    Capital Stock
  Shareholders
    Rights Plan
   56




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 6 
    Capital Stock (Continued)
    Right to Acquire
    Shares
    Note 7 
    Stock-Based Compensation
      Plan

Overview1998 Incentive Compensation Plan
    (the 1998 Plan)

Allows for the grant of stock
    options, restricted stock, and stock equivalent units to
    employees and non-employee directors. It also allows the
    operation of an employee stock purchase program and a deferred
    stock program for non-employee directors. At February 3,
    2007, 1,502,972 stock options, 930,911 restricted shares, and
    30,000 stock equivalent units were outstanding under the 1998
    Plan.1996 Stock Option Plan for
    Non-Employee Directors (the Directors Stock Option
    Plan)

Previously used to award stock
    options to non-employee directors. The plan is no longer used to
    grant stock options. At February 3, 2007, 29,025 stock
    options were outstanding under the Directors Stock Option Plan.1994 Executive Incentive Plan (the
    Executive Plan)

Previously used to award
    restricted stock awards to executive officers, senior management
    and other key employees. This plan terminated on
    January 31, 2004. The termination of the plan does not
    affect shares that are currently outstanding under the plan. At
    February 3, 2007, 48,139 restricted shares were outstanding
    under the Executive Plan.1990 Employee Stock Option and
    Stock Appreciation Rights Plan (the 1990 Plan)

Previously used to award stock
    options to officers and key employees. This plan terminated on
    March 14, 2000. The termination of the plan does not affect
    shares that are currently outstanding under the plan. At
    February 3, 2007, 59,300 stock options were outstanding
    under the 1990 Plan.  57




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 7 
    Stock-Based Compensation (Continued)
  1998
    Plan
  Stock
    Options
    Restricted Stock
    Awards
    Shares Available
    to Grant
    Employee Stock
    Purchase Program
   58




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 7 
    Stock-Based Compensation (Continued)
    Non-Employee
    Directors Deferred Stock Program
    Award
    Activity
   59




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 7 
    Stock-Based Compensation (Continued)
     Stock
    Options
    Weighted-Average


Weighted-Average


AggregateNumber of


Exercise Price


Remaining


IntrinsicOptions


per
    Option


Contractual
    Term


Value(a)Outstanding at January 28,
    2006


2,051,912


$
15.66Granted


279,000



14.49Exercised


(222,613
)


13.64Cancelled


(501,002
)


16.38Outstanding at February 3,
    2007


1,607,297


$
15.51



4.1 years


$
16,715,108Expected to vest


1,491,156


$
15.61



4.0 years


$
15,366,068Exercisable at February 3,
    2007


938,515


$
14.74



3.1 years


$
10,418,395     (a)
    
    The intrinsic value of a stock option is the amount by which the
    fair value of the underlying stock exceeds the exercise price of
    the option.    Restricted
    Stock  Time-Based Awards
      Weighted-Number of


Average GrantShares


Date Fair
    ValueOutstanding at January 28,
    2006


661,910


$
20.83Granted


369,886



14.14Vested


(35,257
)


18.85Cancelled


(288,789
)


19.53Outstanding at February 3,
    2007


707,750


$
17.21      60




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 7 
    Stock-Based Compensation (Continued)
    Restricted
    Stock  Performance-Based Awards
  year-to-year
  2006-2008 2005-2007
    2006-2008
  Note 8 
    Savings Plan Retirement and Postretirement Benefits
   61




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Savings Plan Retirement and Postretirement Benefits
    (Continued)
      Note 9 
    Commitments and Contingencies
    Note 10 
    Leases
        MinimumFiscal
    Year-Ended

Rentals(Dollars in
    millions)2008

$
146.02009


125.92010


109.82011


93.72012


83.0Thereafter


287.5$
845.9     Fiscal
    Year-Ended

2007


2006


2005(Dollars in
    millions)Minimum rentals

$
143.1


$
141.5


$
132.5Contingent rentals


2.0



3.0



3.6Sublease rentals


(10.9
)


(10.5
)


(9.4
)$
134.2


$
134.0


$
126.7  62




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 10 
    Leases (Continued)
  Sale-Leaseback
    Transaction
      Note 11 
    Quarterly Financial Information (Unaudited)
    First


Second


Third


FourthFiscal
    2007

Quarter


Quarter


Quarter


Quarter(Dollars in
    millions, except per share data)Net sales

$
424.7


$
363.2


$
461.9


$
600.8Gross margin


198.0



172.3



219.1



270.4(Loss) income before cumulative
    effect of accounting change


(7.6
)


(21.2
)


0.1



25.8Net (loss) income


(6.6
)


(21.2
)


0.1



25.8Net (loss) income per common share:(Loss) income per common
    share  basic:(Loss) income before cumulative
    effect of accounting change

$
(0.32
)

$
(0.90
)

$
0.00


$
1.09Net (loss) income


(0.28
)


(0.90
)


0.00



1.09(Loss) income per common
    share  diluted:(Loss) income before cumulative
    effect of accounting change


(0.32
)


(0.90
)


0.00



1.05Net (loss) income


(0.28
)


(0.90
)


0.00



1.05   First


Second


Third


FourthFiscal
    2006

Quarter


Quarter


Quarter


Quarter(Dollars in
    millions, except per share data)Net sales

$
420.7


$
383.8


$
474.2


$
604.1Gross margin


204.8



184.8



216.3



253.3Net income (loss)


4.2



(5.1
)


(4.1
)


(18.0
)(1)Net income (loss) per common share:Basic

$
0.19


$
(0.23
)

$
(0.18
)

$
(0.78
)Diluted


0.18



(0.23
)


(0.18
)


(0.78
)     (1)
    
    Net loss for the fourth quarter of fiscal 2006 included a
    non-cash charge for goodwill impairment of $27.1 million.
    See Note 2  Goodwill.  63




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
  Note 12 
    Consolidating Financial Statements
    February 3,
    2007


January 28,
    2006Consolidating




Guarantor











GuarantorBalance
    Sheets

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


Consolidated(Dollars in
    millions)AssetsCurrent assets:Cash and cash equivalents

$
(8.8
)

$
27.2






$
18.4


$
15.5


$
2.4






$
17.9Inventories


200.8



252.6







453.4



194.2



320.5







514.7Deferred income taxes


25.6



6.4







32.0



27.6



10.4







38.0Prepaid expenses and other current
    assets


20.7



9.7







30.4



21.5



13.7







35.2Total current assets


238.3



295.9







534.2



258.8



347.0







605.8Property, equipment and leasehold
    improvements, net


149.6



162.2







311.8



155.2



176.5







331.7Other assets


9.2



1.5







10.7



7.8



1.5







9.3Investment in subsidiaries


50.3







(50.3
)






62.7







(62.7
)


Intercompany receivable


358.1







(358.1
)






397.8







(397.8
)


Total assets

$
805.5


$
459.6


$
(408.4
)

$
856.7


$
882.3


$
525.0


$
(460.5
)

$
946.8Liabilities and
    Shareholders
    EquityCurrent liabilities:Accounts payable

$
144.2


$
3.3






$
147.5


$
117.6


$
29.0






$
146.6Accrued expenses


73.2



1.6







74.8



98.7



(4.6
)






94.1Total current liabilities


217.4



4.9







222.3



216.3



24.4







240.7Long-term debt


125.3











125.3



203.7











203.7Deferred income taxes


(1.5
)


15.7







14.2



6.5



16.7







23.2Lease obligations and other
    long-term liabilities


54.5



30.6







85.1



56.4



23.4







79.8Intercompany payable






358.1



(358.1
)










397.8



(397.8
)


Shareholders equity:Preferred stock






























Common stock


1.4











1.4



1.4











1.4Additional paid-in capital


176.9











176.9



165.4











165.4Retained earnings


274.7



50.3



(50.3
)


274.7



276.6



62.7



(62.7
)


276.6453.0



50.3



(50.3
)


453.0



443.4



62.7



(62.7
)


443.4Treasury stock, at cost


(43.2
)










(43.2
)


(44.0
)










(44.0
)Total shareholders equity


409.8



50.3



(50.3
)


409.8



399.4



62.7



(62.7
)


399.4Total liabilities and
    shareholders equity

$
805.5


$
459.6


$
(408.4
)

$
856.7


$
882.3


$
525.0


$
(460.5
)

$
946.8   64




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Consolidating Financial Statements (Continued)
  Fiscal
    Year-EndedFebruary 3,
    2007


January 28,
    2006Consolidating
    Statement




Guarantor











Guarantorof
    Operations

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


Consolidated(Dollars in
    millions)Net sales

$
1,029.3


$
1,387.8


$
(566.5
)

$
1,850.6


$
1,041.5


$
1,452.5


$
(611.2
)

$
1,882.8Cost of sales (exclusive of
    depreciation and amortization shown separately below)


605.8



951.5



(566.5
)


990.8



622.8



1,012.0



(611.2
)


1,023.6Gross margin


423.5



436.3







859.8



418.7



440.5







859.2Selling, general and administrative
    expenses


395.4



395.1







790.5



369.7



404.3







774.0Store pre-opening and closing costs


4.5



6.6







11.1



14.9



8.5







23.4Depreciation and amortization


24.7



24.5







49.2



21.0



21.2







42.2Goodwill impairment






















27.1







27.1Operating (loss) profit


(1.1
)


10.1







9.0



13.1



(20.6
)






(7.5
)Interest expense, net


6.5



9.1







15.6



5.0



7.8







12.8(Loss) income before income taxes


(7.6
)


1.0







(6.6
)


8.1



(28.4
)






(20.3
)Income tax (benefit) provision


(2.1
)


(1.6
)






(3.7
)


3.2



(0.5
)






2.7(Loss) income before equity income
    (loss) and cumulative effect


(5.5
)


2.6







(2.9
)


4.9



(27.9
)






(23.0
)Equity income (loss) from
    subsidiaries


2.6







(2.6
)






(27.9
)






27.9



(Loss) income before cumulative
    effect


(2.9
)


2.6



(2.6
)


(2.9
)


(23.0
)


(27.9
)


27.9



(23.0
)Cumulative effect of accounting
    change, net of tax


1.0











1.0















Net (loss) income

$
(1.9
)

$
2.6


$
(2.6
)

$
(1.9
)

$
(23.0
)

$
(27.9
)

$
27.9


$
(23.0
)   65




---



##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Consolidating Financial Statements (Continued)
  Fiscal Year-Ended
    January 29, 2005GuarantorConsolidating
    Statement of Operations

Parent


Subsidiaries


Eliminations


Consolidated(Dollars in
    millions)Net sales

$
986.9


$
1,293.0


$
(467.5
)

$
1,812.4Cost of sales (exclusive of
    depreciation and amortization shown separately below)


590.0



827.8



(467.5
)


950.3Gross margin


396.9



465.2







862.1Selling, general and administrative
    expenses


349.4



359.1







708.5Store pre-opening and closing costs


9.6



8.9







18.5Depreciation and amortization


18.4



24.6







43.0Debt repurchase expenses


4.2











4.2Operating profit


15.3



72.6







87.9Interest expense, net


0.9



12.8







13.7Income before income taxes


14.4



59.8







74.2Income tax provision


5.5



22.5







28.0Income before equity income


8.9



37.3







46.2Equity income from subsidiaries


37.3







(37.3
)


Net income

$
46.2


$
37.3


$
(37.3
)

$
46.2   66




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##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Consolidating Financial Statements (Continued)
  Fiscal
    Year-EndedFebruary 3,
    2007


January 28,
    2006Consolidating
    Statements of




Guarantor











GuarantorCash
    Flows

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


Consolidated(Dollars in
    millions)Net cash provided by (used for)
    operating activities

$
54.8


$
51.0


$



$
105.8


$
(101.1
)

$
69.6


$



$
(31.5
)Net cash flows used for investing
    activities:Capital expenditures


(22.2
)


(35.9
)






(58.1
)


(72.6
)


(70.2
)






(142.8
)Net proceeds from sale-leaseback
    transaction






24.7







24.7















Net cash used for investing
    activities


(22.2
)


(11.2
)






(33.4
)


(72.6
)


(70.2
)






(142.8
)Net cash flows provided by (used
    for) financing activities:Net change in revolving credit
    facility


(78.4
)










(78.4
)


103.7











103.7Dividends paid


15.0



(15.0
)






















Proceeds from stock-based
    compensation plans


5.2











5.2



7.9











7.9Other, net


1.3











1.3



1.0











1.0Net cash (used for) provided by
    financing activities


(56.9
)


(15.0
)






(71.9
)


112.6











112.6Net (decrease) increase in cash and
    cash equivalents


(24.3
)


24.8







0.5



(61.1
)


(0.6
)






(61.7
)Cash and cash equivalents at
    beginning of year


15.5



2.4







17.9



76.6



3.0







79.6Cash and cash equivalents at end of
    year

$
(8.8
)

$
27.2


$



$
18.4


$
15.5


$
2.4


$



$
17.9   67




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##### Table of Contents



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Consolidating Financial Statements (Continued)
  Fiscal Year-Ended
    January 29, 2005GuarantorConsolidating
    Statements of Cash Flows

Parent


Subsidiaries


Eliminations


Consolidated(Dollars in
    millions)Net cash provided by operating
    activities

$
117.5


$
24.4


$




141.9Net cash flows used for investing
    activities:Capital expenditures


(42.6
)


(24.5
)






(67.1
)Net cash used for investing
    activities


(42.6
)


(24.5
)






(67.1
)Net cash flows used for financing
    activities:Proceeds from issuance of
    7.5% senior subordinated notes, net


97.4











97.4Purchase of
    103/8% senior
    subordinated notes


(66.6
)










(66.6
)Net change in revolving credit
    facility


(49.3
)










(49.3
)Proceeds from stock-based
    compensation plans


10.0











10.0Other, net


(4.1
)










(4.1
)Net cash used for financing
    activities


(12.6
)










(12.6
)Net increase (decrease) in cash and
    cash equivalents


62.3



(0.1
)






62.2Cash and cash equivalents at
    beginning of year


14.3



3.1







17.4Cash and cash equivalents at end of
    year

$
76.6


$
3.0


$



$
79.6   68




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##### Table of Contents



Item 9.
    Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure    Item 9A.
    Controls and
    Procedures  Disclosure Controls and Procedures
  Form 10-K, Rule 13a-15(e) Form 10-K.
  Managements Annual Report on Internal Control over
    Financial Reporting Rule 13a-15(f)
  Internal Control 
    Integrated Framework.
    Changes in Internal Control Over Financial
    Reporting
 69




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                
     70




---



##### Table of Contents



Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Form 10-K Regulation S-K. Regulation S-K
  Form 8-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Equity
    Compensation Plan Information
  Number of
    SecuritiesRemaining
    Availablefor Future
    IssuanceNumber of
    Securities to





Under EquityBe Issued Upon


Weighted-Average


Compensation
    PlansExercise of


Exercise Price
    of


(ExcludingOutstanding
    Options,


Outstanding
    Options,


Securities
    ReflectedWarrants and
    Rights


Warrants and
    Rights


in Column (a))Plan
    category

(a)


(b)


(c)Equity compensation plans approved
    by security holders


1,591,297


$
15.59



1,681,885Equity compensation plans not
    approved by security
    holders(1)


16,000



7.75



Total


1,607,297


$
15.51



1,681,885     (1)
    
    On February 9, 2001, we registered 319,000 common shares to
    be issued in connection with options to purchase common shares
    pursuant to award agreements with certain employees. The options
    were granted under the rules provided for in the 1998 Incentive
    Compensation Plan. As of February 3, 2007, 16,000 of the
    319,000 securities registered remain to be issued. 71




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##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  180-day
    Item 14.
    Principal
    Accountant Fees and Services     72




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##### Table of Contents



PART IV
  Item 15.
    Exhibits and
    Financial Statement Schedules    Financial Statements
  Form 10-K
  Financial Statement Schedules
    Exhibits
  Form 10-K, Form 10-K.
 73




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##### Table of Contents



Index to
    Exhibits
  ExhibitNumber

Exhibit Description3
.1

Amended and Restated Articles of
    Incorporation of Jo-Ann Stores, Inc. (filed as Exhibit 3.1
    to the Registrants
    Form 10-Q
    filed with the Commission on December 15, 2003 and
    incorporated herein by reference)3
.2

Amended and Restated Code of
    Regulations (filed as Exhibit 3.2 to the Registrants
    Form 8-A/A
    filed with the Commission on March 2, 2007 and incorporated
    herein by reference)4
.1

Indenture between the Registrant
    and Jo-Ann Stores Supply Chain Management, Inc., Team Jo-Ann,
    Inc., FCA of Ohio, Inc., and House of Fabrics, Inc., as
    guarantors, and National City Bank, as trustee, relating to the
    7.50% Senior Subordinated Notes due 2012, including the
    form of note (filed as Exhibit 4.4 to the Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)4
.2

Third Amended and Restated Rights
    Agreement, dated as of February 26, 2007, by and between
    Jo-Ann
    Stores, Inc. and National City Bank, as Rights Agent (filed as
    Exhibit 4.1 to the Companys
    Form 8-A/A
    filed with the Commission on March 2, 2007 and incorporated
    herein by reference)10
.1

Jo-Ann Stores, Inc. Supplemental
    Retirement Benefit Plan, as amended (filed as Exhibit 10.5
    to the Registrants
    Form 10-K
    filed with the Commission on May 2, 2003 and incorporated
    herein by reference)*10
.2

Schedule to Jo-Ann Stores, Inc.
    Supplemental Retirement Benefit Plan, effective as of
    July 27, 2006 (filed as Exhibit 10.9 to the
    Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.3

Employment Agreement dated
    October 21, 2005 between the Registrant and Alan Rosskamm
    (filed as Exhibit 10.1 to the Registrants
    Form 8-K
    filed with the Commission on October 26, 2005 and
    incorporated herein by reference)*10
.4

Employment Agreement dated
    October 21, 2005 between the Registrant and David Holmberg
    (filed as Exhibit 10.2 to the Registrants
    Form 8-K
    filed with the Commission on October 26, 2005 and
    incorporated herein by reference)*10
.5

Fabri-Centers of America, Inc.
    1990 Employees Stock Option and Stock Appreciation Rights Plan,
    as amended (filed as Exhibit 10.8 to the Registrants
    Form 10-K
    filed with the Commission on May 2, 2003 and incorporated
    herein by reference)*10
.6

Jo-Ann Stores, Inc. (formerly
    Fabri-Centers of America, Inc.) 1998 Incentive Compensation
    Plan, as amended (filed as Exhibit 10.9 to the
    Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)*10
.7

Agreement dated October 30,
    2003 among Jo-Ann Stores, Inc., Betty Rosskamm and Alma
    Zimmerman, a member of one of the Companys original
    founding families and who is now deceased (Second Amended and
    Restated) (filed as Exhibit 10.10 to the Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)*10
.8

Amendment to the Second Amended
    and Restated Agreement dated February 22, 2007 among and
    between Jo-Ann Stores, Inc., Betty Rosskamm, and Joan
    Wittenberg, Sandra Zucker and Larry Zimmerman (the
    successors to Alma Zimmerman, a member of one of the
    Companys original founding families and who is now
    deceased )*10
.9

Credit Agreement dated as of
    April 24, 2001 among the Registrant, as borrower, Fleet
    National Bank, as Issuing Bank, Fleet Retail Finance Inc., as
    Administrative Agent and Collateral Agent, Congress Financial
    Corporation, as Documentation Agent, GMAC Commercial Credit,
    LLC, National City Commercial Finance, Inc. and The CIT
    Group/Business Credit, Inc., as Co-Agents, and Fleet Securities
    Inc., as Arranger and Syndication Agent10
.10

First Amendment to Credit
    Agreement dated as of April 24, 200110
.11

Second Amendment to Credit
    Agreement dated as of March 17, 2003 (filed as
    Exhibit 10.13 to the Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference) 74




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##### Table of Contents



ExhibitNumber

Exhibit Description10
.12

Third Amendment to Credit
    Agreement dated as of February 18, 2004 (filed as
    Exhibit 10.14 to the Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)10
.13

Fourth Amendment to Credit
    Agreement dated April 16, 2004 (filed as Exhibit 10.15
    to the Registrants
    Form S-4
    filed with the Commission on May 24, 2004 and incorporated
    herein by reference)10
.14

Fifth Amendment to Credit
    Agreement dated February 23, 2006 (filed as
    Exhibit 10.14 to the Registrants
    Form 10-K
    filed with the Commission on April 13, 2006 and
    incorporated herein by reference)10
.15

Fabri-Centers of America, Inc.
    Executive Incentive Plan (filed as Exhibit 11 to the
    Registrants
    Form 10-K
    filed with the Commission on May 2, 2003 and incorporated
    herein by reference)*10
.16

Fabri-Centers of America, Inc.
    1996 Stock Option Plan for Non-Employee Directors*10
.17

Form of Restricted Stock Award
    Agreement of the Registrant (filed as Exhibit 10.1 to the
    Registrants
    Form 8-K
    filed with the Commission on November 23, 2005 and
    incorporated herein by reference)*10
.18

Form of Notice of Grant of
    Non-Qualified Stock Option (filed as Exhibit 10.2 to the
    Registrants
    Form 8-K
    filed with the Commission on November 23, 2005 and
    incorporated herein by reference)*10
.19

Letter Agreement entered into on
    November 22, 2005 between the Registrant and David Bolen
    regarding Mr. Bolens departure from the Company
    (filed as Exhibit 10.21 to the Registrants
    Form 10-K
    filed with the Commission on April 13, 2006 and
    incorporated herein by reference)*10
.20

Letter Agreement entered into on
    November 23, 2005 between the Registrant and David Holmberg
    regarding Mr. Holmbergs employment with the Company
    (filed as Exhibit 10.22 to the Registrants
    Form 10-K
    filed with the Commission on April 13, 2006 and
    incorporated herein by reference)*10
.21

Letter Agreement entered into on
    February 28, 2006 between the Registrant and Alan Rosskamm
    regarding Mr. Rosskamms cessation of the Chairman,
    President and Chief Executive Officer positions upon the
    assumption of those roles by another individual (filed as
    Exhibit 10.23 to the Registrants
    Form 10-K
    filed with the Commission on April 13, 2006 and
    incorporated herein by reference)*10
.22

Letter Agreement entered into on
    June 29, 2006 between the Company and Darrell Webb
    regarding Mr. Webbs employment with the Company
    (filed as Exhibit 10.1 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.23

Employment Agreement dated
    July 24, 2006 between the Company and Darrell Webb (filed
    as Exhibit 10.2 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.24

Letter Agreement entered into on
    July 10, 2006 between the Company and Travis Smith
    regarding Mr. Smiths employment with the Company
    (filed as Exhibit 10.3 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.25

Employment Agreement dated
    July 31, 2006 between the Company and Travis Smith (filed
    as Exhibit 10.4 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.26

Letter Agreement entered into on
    July 27, 2006 between the Company and James Kerr regarding
    Mr. Kerrs employment with the Company (filed as
    Exhibit 10.5 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.27

Employment Agreement dated
    July 27, 2006 between the Company and James Kerr (filed as
    Exhibit 10.6 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.28

Split Dollar Insurance Agreement
    dated July 27, 2006 between the Company and James Kerr
    (filed as Exhibit 10.7 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.29

Split Dollar Insurance Agreement
    dated July 28, 2006 between the Company and David Holmberg
    (filed as Exhibit 10.8 to the Registrants
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)* 75




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##### Table of Contents



ExhibitNumber

Exhibit Description10
.30

Lease Agreement, dated as of
    October 19, 2006, between BPVisalia LLC, as Landlord, and
    Jo-Ann Stores Supply Chain Management, Inc., as Tenant
    (incorporated by reference to Exhibit 10.1 of
    Form 8-K,
    filed with the Securities and Exchange Commission on
    October 25, 2006)14


Code of Business Conduct and
    Ethics (filed as Exhibit 14 to the Registrants
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)21


Subsidiaries of Jo-Ann Stores, Inc.23


Consent of Ernst & Young
    LLP, Independent Auditors24


Power of Attorney31
.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     *
    
    Indicates a management contract or compensatory plan or
    arrangement 76




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##### Table of Contents



SIGNATURES
    Jo-Ann Stores, Inc.
   By:
    /s/  Darrell
    Webb   President and Chief Executive Officer
    Signature

Title/s/  Darrell
    WebbDarrell
    Webb

Chairman of the Board,
    President,
    Chief Executive Officer and Director
    (Principal Executive Officer)/s/  James
    KerrJames
    Kerr

Executive Vice President and Chief
    Financial Officer 
    (Principal Financial and Accounting Officer)/s/  Scott
    Cowen*Scott
    Cowen

Director/s/  Ira
    Gumberg*Ira
    Gumberg

Director/s/  Patricia
    Morrison*Patricia
    Morrison

Director/s/  Frank
    Newman*Frank
    Newman

Director/s/  Beryl
    Raff*Beryl
    Raff

Director/s/  Alan
    Rosskamm*Alan
    Rosskamm

Director/s/  Gregg
    Searle*Gregg
    Searle

Director/s/  Tracey
    Travis*Tracey
    Travis

Director   Form 10-K
   By:
    /s/  James
    Kerr  Attorney-in-Fact
 77