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 January 31, 2009
  Commission File
    No. 1-6695
      JO-ANN STORES, INC.
 (Exact name of Registrant as
    specified in its charter)
  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
  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-T 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

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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




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##### 



Business
    Strategy
    
    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 will continue to consider new vendor
    programs. We will continue to improve our plan-o-gram processes
    in order to offer compelling and fresh product assortments that
    also inspire customers. We will continue to make tighter buys on
    fashion and seasonal items for faster turns and improved margins.
    Refine our store development programs.  We will
    continue to refine our new store programs in order to generate
    better performance from new stores. In addition, we will
    continue to refine our remodel programs in order to generate
    better performance from our small-format stores and older
    large-format stores.    
    Implementation of a new point-of-sale and store systems SAP
    Retail package, including new human resources and workforce
    management applications.  During fiscal 2009, we
    completed the implementation, which has provided additional
    functionality for managing markdowns and the ability to offer
    new promotional capabilities to enhance margins.
    Continued integration of our Joann.com Internet
    business.  Fiscal 2009 represented our first full
    year of operations for Joann.com. We plan on continuing to
    improve and enhance the integration of our Internet business. We
    expect that full integration of our Internet business will
    achieve stronger synergies with our retail stores and provide an
    additional outlet for marketing opportunities.
    Store remodel and optimization programs.  We
    remerchandised approximately 200 of our small-format stores,
    over and above those we had scheduled for remodels during fiscal
    2009. Our store remodel and optimization programs continued to
    generate incremental sales. Our core sewing and craft business
    delivered positive same-store sales, even as the economy was
    deteriorating.    
    Margin expansion.  We believe margin expansion
    provides the most significant opportunity to improve financial
    results. We believe that margin expansion can be achieved
    primarily due to the following:  
    The percentage of products that we source directly from Asia is
    expected to increase again this year;
    The inflationary pressure we experienced a year ago on products
    sourced from Asia appears to have reversed, and we are now
    seeing product cost deflation;
    Freight expense decreases along with lower oil prices, which
    reduces our cost of sourcing products both globally and
    domestically;
    We intend to buy significantly less fashion and seasonal
    merchandise in fiscal year 2010, which is expected to reduce our
    exposure to promotional and clearance markdowns; and
    We expect to benefit from a full-year impact of the new store
    systems that we rolled-out last year. 2




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##### 




    Further enhance our customer shopping
    experience.  We intend to modify our marketing
    content to deliver a stronger value message. We also intend to
    enhance our industry-leading education and in-store
    demonstration programs. We also intend to continue to expand the
    product offering and functionality of the Joann.com website.
    Continue to update our store base.  Our new
    store and remodel activity will be comparable to fiscal 2009,
    with approximately 20 new stores and 30 remodels.
    Improve our lease terms.  We also have
    approximately 110 leases expiring in fiscal year 2010, 37 of
    which have renewal options. Given the current market conditions,
    we believe there are opportunities to improve the lease terms in
    a number of these store locations.  Product
    Selection
    Fiscal Year-EndedJanuary 31,


February 2,


February 3,2009


2008


2007Principal product lines:Sewing


51
%


50
%


50
%Non-sewing


49
%


50
%


50
%Total


100
%


100
%


100
%   Sewing
    
    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;
    fleece fabrics in both prints and solids used for the
    construction of sportswear, blankets and craft projects for the
    home;
    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.  Non-sewing
   3




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##### 




    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;
    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;
    framed art, photo albums and ready-made frames and, full service
    in-store custom 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.        Marketing
    e-mail
     4




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##### 



Purchasing
    Logistics
      Store
    Operations
  Site Selection.
 5




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##### 



Costs of Opening Stores.
  Store Management.
      Small-


Large-







Small-


Large-format


format


Total




format


format


TotalAlabama


1







1


Nebraska


4







4Alaska


4



2



6


Nevada


3



2



5Arizona


5



10



15


New Hampshire


8







8Arkansas


1







1


New Jersey


11



1



12California


61



22



83


New Mexico


6







6Colorado


8



6



14


New York


29



9



38Connecticut


6



4



10


North Carolina


6



1



7Delaware


2



1



3


North Dakota


4







4Florida


32



19



51


Ohio


38



17



55Georgia


6



6



12


Oklahoma


4







4Idaho


9







9


Oregon


20



4



24Illinois


24



11



35


Pennsylvania


32



11



43Indiana


20



6



26


Rhode Island






1



1Iowa


10







10


South Carolina


2







2Kansas


6



2



8


South Dakota


1







1Kentucky


3



1



4


Tennessee






4



4Louisiana


4







4


Texas


23



13



36Maine


4



1



5


Utah


6



4



10Maryland


13



4



17


Vermont


4







4Massachusetts


22



1



23


Virginia


21



1



22Michigan


25



21



46


Washington


19



11



30Minnesota


14



6



20


West Virginia


5







5Missouri


9



2



11


Wisconsin


13



5



18Montana


6



1



7


Total


554



210



764  6




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##### 



Total
    Stores
  TotalFiscal







In Operation at


Expanded


Square FootageYear

Opened


Closed


Year-End


or Relocated


at Year-End2005


31



(72
)


851



2



15,4532006


44



(57
)


838



2



16,1982007


26



(63
)


801



1



16,2152008


6



(33
)


774



1



15,9322009


21



(31
)


764



1



16,002       Information
    Technology
  look-up,
      Status of Product
    or Line of Business
   7




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##### 



Trademarks
  ® ® ® ® Jo-Ann ® ® ® tm
  Seasonal
    Business
    Customer
    Base
    Backlog of
    Orders
    Regulation
    Competitive
    Conditions
      
    purchasing power;
    brand recognition as the number one resource for fabric-related
    categories;
    ability to support efficient nationwide distribution; and
    the financial resources to execute our strategy going forward. 8




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##### 



Research and
    Development
    Environmental
    Disclosure
    Employees
      Foreign
    Operations and Export Sales
    Other Available
    Information
  Form 10-K, Form 10-Q, Form 8-K
  Form 10-K
 9




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##### 



Item 1A.
    Risk
    Factors      General economic factors may adversely affect our
    business, revenue and profitability
      The current economic downturn and the financial crisis
    could adversely affect us
     10




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Natural disasters and geo-political events could
    adversely affect our business operations and financial
    performance
  e-commerce
  Failure to timely respond to changes in consumer trends
    could negatively impact our business
    Competition could negatively impact our results
      Risks associated with our suppliers could adversely
    affect our operations and financial performance
  agreed-upon
 11




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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
    The seasonality of our sales may negatively impact our
    operating results
    Disruption to the transportation system or increases in
    transportation costs may negatively impact our operating
    results
   12




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##### 



The failure to attract and retain qualified employees
    could limit our growth and negatively impact our
    operations
        Failure to manage inventory effectively could
    negatively impact our operations
      The loss of, or disruption in, or our inability to
    efficiently operate our distribution network could have a
    negative impact on our business
     13




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The efficient operation of our business is dependent on
    our information systems. Disruptions to our information systems,
    or our failure to adequately support, maintain and upgrade these
    systems, could negatively impact our operations and financial
    results.
        Financing needs could restrict our operations
      Failure to comply with the restrictions placed on us by
    our lenders could have a material adverse effect on our
    business
   14




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##### 



Failure to adequately maintain the security of our
    electronic and other confidential information could materially
    adversely affect our financial condition and results of
    operations
  e-commerce
  and/or
  Failure to comply with various regulations, or
    increased litigation, may result in damage to our
    business
      We may not be able to successfully implement our store
    growth strategy
   15




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##### 



Changes in accounting standards
    Effective tax rate
    Inadequacy of our insurance coverage could have a
    material adverse effect on our company
    Our stock price is subject to significant
    volatility
    Events harming our companys reputation could have
    a material adverse effect on our business prospects, financial
    results and stock price
    Other Factors
    Item 1B.
    Unresolved Staff
    Comments   16




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##### 



Item 2.
    Properties    80-acre
    105-acre 105-acre
      Number ofFiscal Year Lease Terms Expire

Store LeasesMonth-to-month


342010


392011


522012


442013


602014


22Thereafter


521Total


772   Item 3.
    Legal
    Proceedings    Item 4.
    Submission of
    Matters to a Vote of Security Holders   17




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##### 



Executive
    Officers of the Registrant
  Regulation S-K.
    Name

Age

PositionDarrell Webb


51


Chairman of the Board, President and Chief Executive OfficerTravis Smith


36


Executive Vice President, Merchandising and Marketing; effective
    as of February 1, 2009, Chief Operating OfficerKenneth Haverkost


52


Executive Vice President, Store OperationsJames Kerr


46


Executive Vice President, Chief Financial Officer   Darrell Webb
  Travis Smith
  Kenneth Haverkost
  James Kerr
  PART II
  Item 5.
    Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities      Common SharesHigh


LowQuarter Ended Fiscal 2009:January 31, 2009

$
19.60


$
10.31November 1, 2008


27.00



14.20August 2, 2008


24.95



18.25May 3, 2008


19.91



12.22Quarter Ended Fiscal 2008:February 2, 2008

$
21.00


$
9.03November 3, 2007


26.53



17.30August 4, 2007


34.75



23.33May 5, 2007


31.30



21.22  18




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##### 



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


Maximum Number ofShares Purchased as


Shares that May YetAverage


Part of Publicly


Be Purchased UnderTotal Number of


Price Paid


Announced Plans or


the Plans orShares Purchased


per Share


Programs


ProgramsNovember 2  29, 2008


571


$
16.51



1,103,414



1,046,586November 30  January 3, 2009


4,320


$
13.47



1,107,734



1,042,266January 4  31, 2009










1,107,734



1,042,266Total


4,891


$
13.82



1,107,734



1,042,266     STOCK PERFORMANCE
    GRAPH
    
 19




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##### 



Item 6.
    Selected Financial Data
  Managements Discussion and
    Analysis of Financial Condition and Results of Operations,
  Fiscal Year-Ended
    (a)January 31,


February 2,


February 3,


January 28,


January 29,2009


2008


2007


2006


2005(Dollars in millions, except per share data)Operating Results:Net sales

$
1,901.1


$
1,878.8


$
1,850.6


$
1,882.8


$
1,812.4Total net sales percentage increase (decrease)


1.2
%


1.5
%


(1.7
)%


3.9
%


4.5
%Same-store sales percentage increase (decrease)
    (b)


0.5
%


3.5
%


(5.9
)%


(0.8
)%


3.2
%Gross margin


882.5



872.4



859.8



859.2



862.1Selling, general and administrative expenses


775.3



774.8



790.5



774.0



708.5Store pre-opening and closing costs


12.3



8.4



11.1



23.4



18.5Depreciation and amortization


54.2



51.8



49.2



42.2



43.0Debt repurchase expenses
    (c)


















4.2Goodwill impairment














27.1



Operating profit (loss)


40.7



37.4



9.0



(7.5
)


87.9Operating profit (loss) as a percent of net sales


2.1
%


2.0
%


0.5
%


(0.4
)%


4.8
%Gain on purchase of senior subordinated notes
    (d)


(4.2
)














Interest expense


9.4



12.5



15.6



12.8



13.7Income (loss) before cumulative effect of accountingchange


21.9



15.4



(2.9
)


(23.0
)


46.2Cumulative effect of change in accounting principle,net of tax
    (e)










1.0







Net income (loss)

$
21.9


$
15.4


$
(1.9
)

$
(23.0
)

$
46.2Net income (loss) as a percent of net sales


1.2
%


0.8
%


(0.1
)%


(1.2
)%


2.5
%Per Share Data:Income (loss) per common share  diluted:Income (loss) before cumulative effect of accountingchange

$
0.86


$
0.62


$
(0.12
)

$
(1.01
)

$
2.02Cumulative effect of change in accounting principle










0.04







Net income (loss)  diluted

$
0.86


$
0.62


$
(0.08
)

$
(1.01
)

$
2.02Weighted average shares outstanding  diluted
    (000s)


25,483



24,950



23,519



22,716



22,887Financial Position:Cash and cash equivalents

$
80.6


$
25.4


$
18.4


$
17.9


$
79.6Inventories


429.4



472.2



453.4



514.7



439.7Inventory turnover


2.3
x


2.2
x


2.0
x


2.1
x


2.3
xCurrent assets


565.2



547.8



543.8



605.8



562.9Property, equipment and leasehold improvements, net


314.8



297.5



311.8



331.7



238.0Total assets


901.1



869.4



866.3



946.8



839.3Current liabilities


257.6



239.4



235.4



242.6



257.1Long-term debt


66.0



100.0



125.3



203.7



100.0Shareholders equity


477.7



440.0



409.8



399.4



408.9Long-term debt to total capitalization


12.1
%


18.5
%


23.4
%


33.8
%


19.7
%Long-term debt to total capitalization, net of cash and cash
    equivalents


(3.2
)%


14.5
%


20.7
%


31.7
%


4.8
%  20




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##### 



Item 6.
    Selected Financial Data (Continued)
  Fiscal Year-Ended
    (a)January 31,


February 2,


February 3,


January 28,


January 29,2009


2008


2007


2006


2005(Dollars in millions, except per share data)Per Share Data:Book value
    (f)

$
18.95


$
17.97


$
17.18


$
17.09


$
18.10Shares outstanding, net of treasury shares (000s)


25,204



24,485



23,857



23,375



22,585Other Financial Information:Capital expenditures:Cash

$
63.6


$
28.6


$
44.6


$
118.9


$
58.2Cash  landlord reimbursement
    (g)


11.1



9.1



13.5



23.9



8.9Total capital expenditures

$
74.7


$
37.7


$
58.1


$
142.8


$
67.1Store Count:Small-format stores


554



578



615



676



733Large-format stores


210



196



186



162



118Total


764



774



801



838



851Store Square Footage (000s)
    (h)Small-format stores


8,141



8,477



9,034



9,810



10,608Large-format stores


7,861



7,455



7,181



6,388



4,845Total


16,002



15,932



16,215



16,198



15,453     (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 a store, the net sales results from that store is
    excluded from the same-store sales calculation until the first
    day of the first month following the one-year anniversary of
    that stores 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)
    
    Debt repurchase expenses include
    expenses related to the early extinguishment of debt.(d)
    
    Gain on purchase of senior
    subordinated notes includes the gain, net of related write-off
    of applicable deferred financing costs, on the purchase of our
    senior subordinated notes. See Note 6 
    Financing contained in the notes to consolidated financial
    statements(e)
    
    Effective January 29, 2006,
    the company adopted Statement of Financial Accounting Standards
    (SFAS) No. 123 (revised 2004),
    Share-Based Payment,
    (SFAS No. 123R), which replaced
    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 and
    Note 1  Significant Accounting
    Policies and Note 8  Stock-Based
    Compensation contained in the notes to consolidated
    financial statements.(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. 21




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##### 



Item 7. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  Form 10-K.
  Overview
      
    Net sales.We closely monitor our net sales,
    including net sales from stores open one year or more
    (same-store sales), by our two store formats,
    small-format stores and large-format stores. Net sales in the
    aggregate and by store type are compared to previous periods to
    measure our overall sales growth and same-store sales are
    compared to previous periods to determine whether existing
    stores are growing their sales volume. We also closely monitor
    average ticket value, both in total and by store format. Average
    ticket represents total sales divided by the total number of
    customer transactions. Customer transactions are impacted by the
    number of customers that shop in our stores. These indicators
    help to measure the effectiveness of our product assortments,
    promotions and service.
    Gross margin.Our management uses gross margin
    to evaluate merchandising, marketing and operating effectiveness
    for the company. Merchandise selection and other future
    decisions such as pricing and promotional activity are, in part,
    based on gross margin performance.
    Selling, general and administrative expense as a percent of
    sales.  We monitor the leveraging of selling,
    general and administrative expense in relation to our sales in
    order to measure the effectiveness of managing expenses.
    Inventory.We closely monitor our inventory
    investment, which is our single largest invested asset, and our
    inventory turnover rate. Due to the large investment in
    inventory, changes in inventory levels can have a significant
    impact on our liquidity. Also, inventory turnover is an
    indicator of how effectively we manage our inventory levels in
    relation to our sales.
    Debt to total capitalization and excess credit
    availability.  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.    
    Net sales increased 1.2 percent to $1.901 billion.
    Same-store sales increased 0.5 percent versus a
    3.5 percent same-store sales increase for the prior year.
    The increase in same-store sales primarily was driven by a
    0.5 percent increase in average ticket due to better
    in-stocks, more effective marketing and the benefit of
    competitive withdrawals in the sewing business.
    Our gross margin rate, as a percentage of net sales, was
    consistent with the prior year at 46.4 percent. We entered
    the fourth quarter of fiscal 2009 with a 60 basis point increase
    for the first nine months of the year, as the result of a
    smaller percentage of clearance sales to total sales during the
    first nine months of fiscal 2009 as compared to the same period
    of the prior year and lower costs from global 22




---



##### 



sourcing initiatives, particularly related to fabrics. Due to
    economic pressures, we elected to take pricing actions on
    seasonal products earlier in the fourth quarter as compared to
    the fourth quarter of fiscal 2008 in order to ensure a
    reasonable sell-through, resulting in a full year gross margin
    rate at a comparable rate with the prior 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, decreased 40 basis points from 41.2 percent
    last year to 40.8 percent this year. The decrease is
    primarily the result of our continued efforts to control
    expenses.
    Inventory decreased by $42.8 million in fiscal 2009. Our
    inventory turnover improved from 2.2 turns for fiscal 2008 to
    2.3 turns for fiscal 2009. The improvement is the result of our
    inventory initiatives to reduce seasonal and fashion
    merchandise, which have a higher promotional and clearance risk
    than our basic inventory categories.
    Our debt to total capitalization ratio improved 640 basis points
    from 18.5 percent last year to 12.1 percent for fiscal
    2009. During the year, we purchased $34 million of our
    senior subordinated notes. As of fiscal 2009 year end, we
    had approximately $235.2 million of excess availability
    under our senior bank credit facility.  Executive
    Overview of Fiscal 2009
  Qtr 1


Qtr 2


Qtr 3


Qtr 4


Total(Dollars in millions)Net sales

$
446.1


$
403.0


$
480.1


$
571.9


$
1,901.1Same-store sales percent change


4.5
%


3.3
%


(1.5
)%


(2.9
)%


0.5
%Gross margin

$
206.8


$
191.8


$
235.3


$
248.6


$
882.5Gross margin percent


46.4
%


47.6
%


49.0
%


43.5
%


46.4
%Gross margin basis point change from prior year


(90
)


190



100



(150
)


Selling, general and administrative expenses

$
184.5


$
191.6


$
199.5


$
199.7


$
775.3SG&A percent to sales


41.4
%


47.5
%


41.6
%


34.9
%


40.8
%SG&A basis point decrease (increase) from prior year


230



90



(10
)


(40
)


40Net income (loss)

$
3.0


$
(11.7
)

$
10.2


$
20.4


$
21.9Net income (loss) percent to sales


0.7
%


(2.9
)%


2.1
%


3.6
%


1.2
%Net income (loss) basis point change from prior year


110



180



40



(110
)


40     
    improve the customer shopping experience in our stores;
    enhance our marketing and merchandising offers; and
    refine our store development program.    
    implementation of a new
    point-of-sale
    and store systems SAP Retail package, including new human
    resources and workforce management applications;
    continued integration of our Joann.com Internet business, to
    achieve stronger synergy with our retail stores; and
    remerchandising approximately 200 of our small-format stores,
    over and above those we remodeled. 23




---



##### 




    Notwithstanding the economic pressures encountered by retailers
    during the second half of fiscal 2009, we were able to achieve a
    0.5 percent growth in same-store sales for fiscal 2009.
    We gained expense leverage, as SG&A as a percentage of net
    sales decreased 40 basis points from last year. The improvement
    was driven primarily by expense leverage in store labor and
    distribution expenses.
    Earnings per share for the year improved to $0.86 per diluted
    share, compared with earnings of $0.62 per diluted share in the
    prior year.
    We ended fiscal 2009 with 9.0 percent less inventory than
    the prior year. We believe the quality of our inventory is
    better and we have maintained strong in-stocks at our
    distribution centers and at the store level.
    Our store remodel and optimization programs continued to
    generate incremental sales. Our core sewing and craft business
    delivered positive same-store sales for the full year, including
    the fourth quarter.
    We decreased our debt levels during the year by purchasing
    $34 million of our senior subordinated notes.
    We ended fiscal year 2009 with a $55.2 million increase in
    cash and cash equivalents.               24




---



##### 



Recent
    Developments and Business Update
        
    Margin expansion;
    Further enhance our customer shopping experience;
    Continue to update our store base; and
    Improve our leasing terms.    
    The percentage of products that we source directly from Asia is
    expected to increase again this year;
    The inflationary pressure we experienced a year ago on products
    sourced from Asia appears to have reversed, and we are now
    seeing product cost deflation;
    Freight expense decreases along with lower oil prices, which
    reduces our cost of sourcing products both globally and
    domestically;
    We intend to buy significantly less fashion and seasonal
    merchandise in fiscal year 2010, which is expected to reduce our
    exposure to promotional and clearance markdowns; and
    The new store systems we rolled-out last year are expected to
    provide additional tools for managing markdowns and give us new
    promotional capabilities to enhance margins.       25




---



##### 



Results of
    Operations
    Fiscal Year-EndedJan 31, 2009


Feb 2, 2008


Feb 3, 2007Net sales


100.0
%


100.0
%


100.0
%Gross margin


46.4
%


46.4
%


46.5
%Selling, general and administrative expenses


40.8
%


41.2
%


42.7
%Store pre-opening and closing costs


0.6
%


0.4
%


0.6
%Depreciation and amortization


2.9
%


2.8
%


2.7
%Operating profit


2.1
%


2.0
%


0.5
%   Comparison of the
    52 Weeks Ended January 31, 2009 and February 2, 2008
    and 53 Weeks Ended February 3, 2007
  Net sales. year-over-year
  Consolidated Net
    Sales:
  Percentage


PercentageChange


Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07Consolidated net sales


$1,901.1



$1,878.8



$1,850.6



1.2
%


1.5
%Increase from prior year


$22.3



$28.2Same-store sales percentage change


0.5
%


3.5
%


(5.9
)%   Fiscal
    2009:
       26




---



##### 



Fiscal
    2008:
        Sales by
    Segment:
  Percentage


PercentageChange


Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07Large-format storesNet sales


$983.6



$975.3



$915.3



0.9
%


6.6
%Increase from prior year


$8.3



$60.0Same-store sales percentage change


(1.0
)%


3.9
%


(8.0
)%Small-format storesNet sales


$881.8



$891.6



$935.3



(1.1
%)


(4.7
%)Decrease from prior year


$(9.8
)


$(43.7
)Same-store sales percentage change


2.1
%


3.0
%


(4.1
)%OtherNet sales


$35.7



$11.9Increase from prior year


$23.8



$11.9   Fiscal
    2009:
           27




---



##### 



Fiscal
    2008:
        Gross margin.
  Gross
    Margin:
  Percentage


PercentageChange


Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07Gross margin


$882.5



$872.4



$859.8



1.2
%


1.5
%Increase from prior year


$10.1



$12.6Percentage of consolidated net sales


46.4
%


46.4
%


46.5
%






(10 bps
)  28




---



##### 



year-over-year.
    Selling, general and administrative
    expenses.
    Selling, general
    and administrative expenses:
  Percentage


PercentageChange


Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07SG&A


$775.3



$774.8



$790.5



0.1
%


(2.0
)%Increase (decrease) from prior year


$0.5



$(15.7
)Percentage of consolidated net sales


40.8
%


41.2
%


42.7
%


(40 bps
)


(150 bps
)          29




---



##### 



Store pre-opening and closing
    costs.
      Depreciation and amortization.
    Operating
    profit.
  Percentage Change


Percentage Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07Operating profit


$40.7



$37.4



$9.0



8.8
%


315.6
%Increase from prior year


$3.3



$28.4       Operating profit
    (loss) by Segment:
  Percentage Change


Percentage Change(Dollars in millions)

FY09


FY08


FY07


FY09 vs. FY08


FY08 vs. FY07Large-format storesOperating profit


$67.6



$65.6



$53.5



3.0
%


22.6
%Increase from prior year


$2.0



$12.1Small-format storesOperating profit


$97.4



$98.0



$93.1



(0.6
%)


5.3
%Decrease from prior year


$(0.6
)


$4.9OtherOperating loss


$(124.3
)


$(126.2
)


$(137.6
)


1.5
%


8.3
%Increase from prior year


$1.9



$11.4  30




---



##### 



Fiscal
    2009:
    Fiscal
    2008:
    Gain on purchase of senior subordinated
    notes.
  Interest expense.
  Income taxes.
     31




---



##### 



Store Closing
    Charges
  Store pre-opening and closing costs
    Stock-Based
    Compensation
      Liquidity and
    Capital Resources
     32




---



##### 



2009


2008


2007(In millions)Net cash provided by operating activities

$
157.9


$
73.6


$
105.8Net cash used for investing activities


(77.8
)


(49.4
)


(33.4
)Net cash used for financing activities


(24.9
)


(17.2
)


(71.9
)Net increase in cash and cash equivalents

$
55.2


$
7.0


$
0.5Ending cash and cash equivalents

$
80.6


$
25.4


$
18.4   Net Cash Provided
    By Operating Activities
      Capital
    Expenditures
        Net Cash Used For
    Investing Activities
    Capital
    Expenditures
   33




---



##### 



2010Outlook


2009


2008


2007(In millions)Cash

$
30 - $32


$
63.6


$
28.6


$
44.6Cash  landlord-reimbursed


15.0



11.1



9.1



13.5Total

$
45 - $47


$
74.7


$
37.7


$
58.1           Sale-Leaseback
    Transaction
  80-acre
    Net Cash Used For
    Financing Activities
   34




---



##### 



Common Share
    Repurchases
    Sources of
    Liquidity
          Secured Bank Credit Facility. sub-limit
 35




---



##### 



Senior Subordinated Notes.
        /
  Off-Balance Sheet
    Transactions
   36




---



##### 



Contractual
    Obligation and Commitments
    Payments Due by Period
    (1)Less than








AfterTotal


1 year


1-3 years


4-5 years


5 years(In millions)7.5 percent senior subordinated notes

$
66.0


$



$
66.0


$



$
7.5 percent senior subordinated notes accrued interest
    (1)


17.3



4.9



12.4







Standby letters of credit


20.1



20.1











Purchase commitments
    (2)


18.8



2.7



8.8



6.6



0.7Royalty commitments
    (3)


2.4



1.3



1.1







Agent fee commitments
    (4)


15.0



7.8



7.2







Operating leases


861.0



153.1



264.3



199.3



244.3FIN 48  Uncertain tax positions
    (5)


11.4



1.7



0.4



9.3



Promissory notes
    (6)


5.5



3.1



2.4







Amended Credit Facility


















Total Contractual Cash Obligations

$
1,017.5


$
194.7


$
362.6


$
215.2


$
245.0     (1)

    
    Interest is included as a contractual obligation on the
    7.5 percent Notes only. The calculation of interest on the
    Amended 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 Amended Credit
    Facility.(2)

    
    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.(3)

    
    Royalty commitments include guaranteed minimum royalty payments
    to various designers for use of their name and product line and
    is based off a guaranteed minimum sales figure per year.(4)

    
    Agent fee commissions include minimum commission fees for
    sourcing import purchases.(5)

    
    The company adopted FIN 48 at the beginning of fiscal year
    2008.(6)

    
    Represents delayed payments in relation to the Joann.com
    acquisition.  Seasonality and
    Inflation
   37




---



##### 



Fiscal 2009



Fiscal 2008Qtr 1


Qtr 2


Qtr 3


Qtr 4



Qtr 1


Qtr 2


Qtr 3


Qtr 4(In millions)Net sales

$
446.1


$
403.0


$
480.1


$
571.9



$
424.2


$
388.5


$
480.2


$
585.9Same-store sales percentage change


4.5
%


3.3
%


(1.5
)%


(2.9
)%



1.8
%


7.0
%


2.4
%


3.3
%Gross margin

$
206.8


$
191.8


$
235.3


$
248.6



$
200.6


$
177.4


$
230.5


$
263.9Gross margin percent to sales


46.4
%


47.6
%


49.0
%


43.5
%



47.3
%


45.7
%


48.0
%


45.0
%Operating profit (loss)

$
7.4


$
(16.5
)

$
17.3


$
32.5



$
0.1


$
(26.2
)

$
16.7


$
46.8Operating profit (loss) percent to sales


1.7
%


(4.1
)%


3.6
%


5.7
%



0.0
%


(6.7
)%


3.5
%


8.0
%Net income (loss)

$
3.0


$
(11.7
)

$
10.2


$
20.4



$
(1.7
)

$
(18.4
)

$
8.0


$
27.5Inventories


426.9



472.6



522.3



429.4




434.9



507.9



570.9



472.2Long-term debt


100.0



100.0



112.7



66.0




117.8



159.0



202.0



100.0     Critical
    Accounting Policies and Estimates
    Inventory
    Valuation
         38




---



##### 



Valuation of
    Long-Lived Assets and Goodwill
        Income
    Taxes
    Stock-Based
    Compensation
   39




---



##### 



end-of-year
          Recent Accounting
    Pronouncements
    Statement of
    Financial Accounting Standards No. 141 (revised 2007),
    Business Combinations
   
  Statement of
    Financial Accounting Standards No. 160,
    Non-controlling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  .
  Cautionary
    Statement Concerning Forward-Looking Statements
   40




---



##### 



Item 7A. Quantitative
    and Qualitative Disclosures About Market Risk
       41




---



##### 



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


43Consolidated Balance Sheets as of
    January 31, 2009 and February 2, 2008


44Consolidated Statements of Operations for each of
    the three fiscal years in the period ended January 31,
    2009


45Consolidated Statements of Cash Flows for each of
    the three fiscal years in the period ended January 31,
    2009


46Consolidated Statements of Shareholders
    Equity for each of the three fiscal years in the period ended
    January 31, 2009


47Notes to Consolidated Financial Statements


48   42




---



##### 



Report of
    Independent Registered Public Accounting Firm              
    43




---



##### 



Jo-Ann Stores,
    Inc.



Consolidated
    Balance Sheets  January 31,


February 2,2009


2008(Dollars in millions, except share and per share data)AssetsCurrent assets:Cash and cash equivalents

$
80.6


$
25.4Inventories


429.4



472.2Deferred income taxes


23.5



26.4Prepaid expenses and other current assets


31.7



23.8Total current assets


565.2



547.8Property, equipment and leasehold improvements, net


314.8



297.5Goodwill, net


11.6



11.8Other assets


9.5



12.3Total assets

$
901.1


$
869.4Liabilities and Shareholders EquityCurrent liabilities:Accounts payable

$
145.1


$
129.4Accrued expenses


112.5



110.0Total current liabilities


257.6



239.4Long-term debt


66.0



100.0Long-term deferred income taxes


3.2



Lease obligations and other long-term liabilities


96.6



90.0Commitments and contingencies (Note 10)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 28,872,085 and 28,072,032, respectively


1.4



1.4Additional paid-in capital


211.7



194.6Retained earnings


310.4



288.5523.5



484.5Treasury stock, at cost, 3,667,677 shares and
    3,586,872 shares, respectively


(45.8
)


(44.5
)Total shareholders equity


477.7



440.0Total liabilities and shareholders equity

$
901.1


$
869.4   See notes to consolidated financial statements
 44




---



##### 



Jo-Ann Stores,
    Inc.



Consolidated
    Statements of Operations  Fiscal Year-EndedJanuary 31,


February 2,


February 3,2009


2008


2007(Dollars in millions,except earnings(loss) per share data)Net sales

$
1,901.1


$
1,878.8


$
1,850.6Cost of sales (exclusive of depreciation and amortization shown
    separately below)


1,018.6



1,006.4



990.8Gross margin


882.5



872.4



859.8Selling, general and administrative expenses


775.3



774.8



790.5Store pre-opening and closing costs


12.3



8.4



11.1Depreciation and amortization


54.2



51.8



49.2Operating profit


40.7



37.4



9.0Gain on purchase of senior subordinated notes


(4.2
)






Interest expense, net


9.4



12.5



15.6Income (loss) before income taxes


35.5



24.9



(6.6
)Income tax provision (benefit)


13.6



9.5



(3.7
)Income (loss) before cumulative effect of accounting change


21.9



15.4



(2.9
)Cumulative effect of change in accounting principle, net of tax










1.0Net income (loss)

$
21.9


$
15.4


$
(1.9
)Income (loss) per common share  basic:Income (loss) before cumulative effect of accounting change

$
0.88


$
0.63


$
(0.12
)Cumulative effect of change in accounting principle










0.04Net income (loss)

$
0.88


$
0.63


$
(0.08
)Income (loss) per common share  diluted:Income (loss) before cumulative effect of accounting change

$
0.86


$
0.62


$
(0.12
)Cumulative effect of change in accounting principle










0.04Net income (loss)

$
0.86


$
0.62


$
(0.08
)   See notes to consolidated financial statements
 45




---



##### 



Jo-Ann Stores,
    Inc.
  Consolidated
    Statements of Cash Flows
  Fiscal Year-EndedJanuary 31,


February 2,


February 3,2009


2008


2007(Dollars in millions)Net cash flows from operating activities:Net income (loss)

$
21.9


$
15.4


$
(1.9
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization


54.2



51.8



49.2Deferred income taxes


6.8



0.7



(3.0
)Stock-based compensation expense


9.4



8.3



6.9Cumulative effect of change in accounting principle










(1.0
)Amortization of deferred financing costs


0.8



0.9



0.9Loss on disposal and impairment of fixed assets


2.9



1.6



5.6Gain on purchase of senior subordinated notes


(4.2
)






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


42.8



(18.8
)


61.3(Increase) decrease in prepaid expenses and other current assets


(7.9
)


6.6



4.8Increase (decrease) in accounts payable


15.7



(4.2
)


(0.3
)Increase (decrease) in accrued expenses


5.5



3.7



(7.5
)Increase (decrease) in lease obligations, net


9.1



(3.6
)


2.6(Decrease) increase in other long-term liabilities


(2.5
)


12.0



(0.4
)Other, net


3.4



(0.8
)


(11.4
)Net cash provided by operating activities


157.9



73.6



105.8Net cash used for investing activities:Capital expenditures


(74.7
)


(37.7
)


(58.1
)Net proceeds from sale-leaseback transaction










24.7Payment for acquisition, net of cash acquired


(3.1
)


(11.7
)


Net cash used for investing activities


(77.8
)


(49.4
)


(33.4
)Net cash flows used for financing activities:Purchase of senior subordinated notes


(29.5
)






Net change in revolving credit facility






(25.3
)


(78.4
)Proceeds from stock-based compensation plans


6.0



7.8



5.2Other, net


(1.4
)


0.3



1.3Net cash used for financing activities


(24.9
)


(17.2
)


(71.9
)Net increase in cash and cash equivalents


55.2



7.0



0.5Cash and cash equivalents at beginning of year


25.4



18.4



17.9Cash and cash equivalents at end of year

$
80.6


$
25.4


$
18.4Supplemental disclosures of cash flow information:Cash paid during the year for:Interest

$
9.4


$
12.5


$
15.2Income taxes, net of refunds


2.3



(7.2
)


20.1   See notes to consolidated financial statements
 46




---



##### 



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






Stock


Additional








TotalCommon


Treasury



Stated


Paid-In


Treasury


Retained


ShareholdersShares


Shares



Value


Capital


Stock


Earnings


Equity(Shares in thousands)









(Dollars in millions)Balance, 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 
    SFAS 123R (note 1)















(1.6
)










(1.6
)Balance February 3, 2007


23,857



3,543




1.4



176.9



(43.2
)


274.7



409.8Change in accounting principle - FIN 48 (note 5)























(1.6
)


(1.6
)Adjusted balance at February 3, 2007


23,857



3,543




1.4



176.9



(43.2
)


273.1



408.2Net income























15.4



15.4Total comprehensive income



























15.4Exercise of stock options


350



(16
)







5.6



0.1







5.7Tax benefit on equity compensation















1.7











1.7Stock-based compensation


203












8.3











8.3Purchase of common stock


(60
)


60












(1.4
)






(1.4
)Issuance of common stock  Associate Stock Ownership
    Plan


135












2.1











2.1Balance, February 2, 2008


24,485



3,587




1.4



194.6



(44.5
)


288.5



440.0Net income























21.9



21.9Total comprehensive income



























21.9Exercise of stock options


406












4.1











4.1Tax benefit on equity compensation















1.7











1.7Stock-based compensation


248












9.4











9.4Purchase of common stock


(81
)


81












(1.3
)






(1.3
)Issuance of common stock  Associate Stock Ownership
    Plan


146












1.9











1.9Balance, January 31, 2009


25,204



3,668



$
1.4


$
211.7


$
(45.8
)

$
310.4


$
477.7   See notes to consolidated financial statements
 47




---



##### 



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
    Cash and Cash
    Equivalents
    Inventories
   48




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)      Property,
    Equipment and Leasehold Improvements
      Fiscal Year2009


2008(Dollars in millions)Land and buildings

$
70.3


$
69.5Furniture, fixtures and equipment


503.6



458.9Leasehold improvements


158.3



148.0Construction in progress


22.5



11.6754.7



688.0Less accumulated depreciation and amortization


(439.9
)


(390.5
)Property, equipment and leasehold improvements, net

$
314.8


$
297.5   Software
    Development
    Goodwill
   49




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)          Impairment of
    Long-Lived Assets
   50




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)    Fiscal Year-Ended2009


2008


2007(Dollars in millions)SegmentLarge-format stores

$
1.9


$
0.4


$
3.8Small-format stores


0.1



0.2



0.3Total

$
2.0


$
0.6


$
4.1   Store Pre-Opening
    and Closing Costs
      Fiscal Year-Ended2009


2008


2007(Dollars in millions)Store pre-opening costs

$
7.8


$
3.1


$
5.0Store closing costs


4.5



5.3



6.1$
12.3


$
8.4


$
11.1   Accrued
    Expenses
   51




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)    Fiscal Year2009


2008(Dollars in millions)Accrued taxes

$
27.8


$
26.2Accrued compensation


21.3



28.2Workers compensation and general liability insurance


10.4



9.7Capital expenditures payable


10.2



3.3Occupancy and rent-related liabilities


16.6



15.5Customer gift cards


12.2



12.4Other


14.0



14.7Total accrued expenses

$
112.5


$
110.0   Lease obligations
    and other long-term liabilities
    Fiscal Year2009


2008(Dollars in millions)Workers compensation and general liability insurance

$
14.7


$
14.0Occupancy and rent-related liabilities


76.2



67.0Other


5.7



9.0Total lease obligations and other long-term liabilities

$
96.6


$
90.0     Fiscal Year-Ended

Liability(Dollars in millions)2010

$
10.42011


4.72012


3.52013


2.32014


1.8Thereafter


2.4Total workers compensation and general liability insurance

$
25.1   Financial
    Instruments
   52




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)      Income
    Taxes
        Revenue
    Recognition
   53




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)        Cost of
    Sales
    02-16,
  Operating
    Leases
     54




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)  Advertising
    Costs
    Earnings Per
    Share
    Fiscal Year-Ended2009


2008


2007(Dollars in millions, except per share data)Income (loss) before cumulative effect of accounting change

$
21.9


$
15.4


$
(2.9
)Cumulative effect of change in accounting principle, net of tax










1.0Net income (loss)

$
21.9


$
15.4


$
(1.9
)Weighted average shares outstanding (shares in thousands):Basic


24,886



24,296



23,519Incremental shares from assumed exercise of stock options


200



324



Incremental restricted shares


397



330



Diluted


25,483



24,950



23,519Income (loss) per common share  basic:Income (loss) before cumulative effect of accounting change

$
0.88


$
0.63


$
(0.12
)Cumulative effect of change in accounting principle










0.04Net income (loss) per common share

$
0.88


$
0.63


$
(0.08
)Income (loss) per common share  diluted:Income (loss) before cumulative effect of accounting change

$
0.86


$
0.62


$
(0.12
)Cumulative effect of change in accounting principle










0.04Net income (loss) per common share

$
0.86


$
0.62


$
(0.08
)      55




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 1 
    Significant
    Accounting Policies (Continued)  Stock-Based
    Compensation
        Fiscal Year-Ended2009


2008


2007(Dollars in millions)Stock option compensation
    expense(a)

$
4.3


$
2.9


$
3.3Restricted stock award amortization


5.1



5.4



3.6$
9.4


$
8.3


$
6.9     (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-Ended2009

2008

2007Weighted average fair value of options granted

$4.87

$7.99

$5.69Expected volatility of underlying stock

.437 to .459

.388 to .417

.418 to .584Risk-free interest rates

2.1% to 3.2%

3.3% to 4.9%

4.2% to 5.2%Expected life

2.2 to 5.2 years

2.2 to 5.2 years

2.2 to 5.2 yearsExpected life  Associate Stock Ownership Plan

6 months

6 months

6 months    56




---



##### 



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. 141 (revised 2007),
    Business Combinations
    Statement of
    Financial Accounting Standards No. 160,
    Non-controlling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  
  Note 2 
    Goodwill    Note 3 
    Acquisition       57




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 3
    
    Acquisition (Continued)      As ofNovember 5,2007(Dollars inmillions)Cash

$
2.9Inventories


0.8Prepaid expenses and other current assets


0.5Property, plant and equipment


1.4Deferred income taxes


11.6Goodwill


11.6Accounts payable


(2.6
)Accrued expenses


(2.6
)Total acquisition cost

$
23.6   Note 4 
    Store
    Closings    Fiscal Year-Ended2009


2008


2007(Dollars in millions)Store Closing Charges:Non-cancelable lease obligations

$
0.2


$
1.3


$
0.7Asset-related charges


0.7



0.9



1.5Other store closing costs


3.6



3.1



3.9Total

$
4.5


$
5.3


$
6.1          58




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
  Note 5 
    Income
    Taxes            Fiscal Year2009(Dollars inmillions)Balance at February 2, 2008

$
7.8Increases related to prior year tax positions


0.2Decreases related to prior year tax positions


(0.2
)Increases related to current year tax positions


1.0Settlements


Lapse of statute of limitations


(0.8
)Balance at January 31, 2009

$
8.0     Fiscal Year-Ended2009


2008


2007(Dollars in millions)Current:Federal

$
5.6


$
7.3


$
(3.3
)State and local


1.2



1.5



2.66.8



8.8



(0.7
)Deferred


6.8



0.7



(3.0
)Income tax provision (benefit)

$
13.6


$
9.5


$
(3.7
)  59




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 5 
    Income Taxes
    (Continued)    Fiscal Year-Ended2009


2008


2007(Dollars in millions)Federal income tax at the statutory rate

$
12.4


$
8.7


$
(2.3
)Effect of:State and local taxes


1.3



1.4



0.4Settlement of federal tax liabilities from prior years










(1.1
)Other, net


(0.1
)


(0.6
)


(0.7
)Income tax provision (benefit)

$
13.6


$
9.5


$
(3.7
)     Fiscal YearAsset/(Liability)2009


2008(Dollars in millions)CurrentDeferred tax assets:Inventory items

$
10.1


$
10.7Lease obligations


0.6



0.6Employee benefits


7.8



9.0Other


5.0



6.1Net current deferred tax asset

$
23.5


$
26.4Non-currentDeferred tax assets:Lease obligations

$
33.6


$
29.6Employee benefits


8.3



8.0Federal net operating loss carryforwards


10.5



11.1State net operating loss carryforwards


2.9



3.0State credits


3.9



Other


5.0



7.1Valuation allowances


(3.9
)


(1.7
)60.3



57.1Deferred tax liabilities:Depreciation


(62.9
)


(54.4
)Other


(0.6
)


(0.6
)(63.5
)


(55.0
)Net non-current deferred tax asset (liability)

$
(3.2
)

$
2.1Total Deferred Taxes

$
20.3


$
28.5  60




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 5 
    Income Taxes
    (Continued)     Note 6 
    Financing    Secured Credit
    Facility
       61




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 6 
    Financing
    (Continued)      Senior
    Subordinated Notes
        and/or
  Note 7 
    Capital
    Stock  Shareholders
    Rights Plan
   62




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 7 
    Capital Stock
    (Continued)  Right to Acquire
    Shares
    Note 8 
    Stock-Based
    Compensation      Plan

Overview2008 Incentive Compensation Plan (the 2008 Plan)

Approved by Shareholders on June 11, 2008. Allows for the grant
    of stock appreciation rights, stock awards, stock options, stock
    purchase rights and incentive compensation awards (payable in
    shares or cash) to employees and non-employee directors. It also
    allows the operation of a deferred stock program for
    non-employee directors. At January 31, 2009, 5,440 stock options
    and 45,657 restricted shares were outstanding under the 2008
    Plan.2008 Associate Stock Ownership Plan

Approved by Shareholders on June 11, 2008.  It allows the
    operation of an employee stock purchase program.1998 Incentive Compensation Plan (the 1998 Plan)

Previously used to grant stock appreciation rights, stock
    awards, stock options, stock purchase rights and incentive
    compensation awards (payable in shares or cash) to employees and
    non-employee directors. It also allowed the operation of an
    employee stock purchase program and a deferred stock program for
    non-employee directors. At January 31, 2009, 1,736,180 stock
    options and 748,977 restricted shares were outstanding under the
    1998 Plan. This plan terminated on June 3, 2008. The termination
    of the plan does not affect awards that are currently
    outstanding under the 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
    January 31, 2009, 3,225 stock options were outstanding under the
    Directors Stock Option Plan. 63




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Stock-Based
    Compensation (Continued)  Plan

Overview1994 Executive Incentive Plan (the Executive Plan)

Previously used to award restricted shares to executive
    officers, senior management and other key employees. This plan
    terminated on January 31, 2004. During fiscal 2009, the
    remaining 21,850 restricted shares vested so there were no
    restricted shares outstanding under the Executive Plan at
    January 31, 2009. The Executive Plan was deregistered
    on March 5, 2009.1990 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 awards that are
    currently outstanding under the plan.  During fiscal 2009, the
    remaining 2,500 options expired so there were no options
    outstanding under the 1990 Plan at January 31, 2009. The 1990
    Plan was deregistered on March 5, 2009.     Stock
    Options
     64




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Stock-Based
    Compensation (Continued)      Weighted-Average


Weighted-Average


AggregateNumber of


Exercise Price


Remaining


IntrinsicOptions


per Option


Contractual Term


Value(a)Outstanding at February 2, 2008


1,676,985


$
18.06Granted


604,853



14.33Exercised


(403,789
)


10.01Cancelled


(133,204
)


18.98Outstanding at January 31, 2009


1,744,845


$
18.57



4.7 years


$
249,410Expected to vest


1,557,609


$
18.67



4.6 years


$
240,850Exercisable at January 31, 2009


580,313


$
20.98



3.1 years


$
208,886     (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 Share
    Awards  Time-Based Awards
         65




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Stock-Based
    Compensation (Continued)    Weighted-Number of


Average GrantShares


Date Fair ValueOutstanding at February 2, 2008


592,780


$
19.75Granted


517,977



14.84Vested


(269,567
)


20.80Cancelled


(46,536
)


16.89Outstanding at January 31, 2009


794,654


$
16.37       Restricted
    Shares  Performance-Based Awards
       66




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Stock-Based
    Compensation (Continued)      Shares Available
    to Grant
    Employee Stock
    Purchase Program
      Non-Employee
    Directors Deferred Stock Program
   67




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 8 
    Stock-Based
    Compensation (Continued)      Note 9 
    Savings Plan
    Retirement and Postretirement Benefits      Note 10 
    Commitments and
    Contingencies    Note 11 
    Leases     68




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 11 
    Leases
    (Continued)    MinimumFiscal Year-Ended

Rentals(Dollars in millions)2010

$
153.12011


138.62012


125.72013


108.82014


90.5Thereafter


244.3$
861.0     Fiscal Year-Ended

2009


2008


2007(Dollars in millions)Minimum rent expense

$
147.9


$
146.4


$
143.1Contingent rent expense


1.5



1.6



2.0Sublease rent expense


(9.9
)


(9.6
)


(10.9
)$
139.5


$
138.4


$
134.2   Sale-Leaseback
    Transaction
      Note 12 
    Segment
    Reporting   69




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Segment Reporting
    (Continued)        70




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 12 
    Segment Reporting
    (Continued)  Large-format


Small-formatStores


Stores


Other


Consolidated(Dollars in millions)Fiscal 2009Net sales

$
983.6


$
881.8


$
35.7


$
1,901.1Store pre-opening and closing costs


5.8



6.5







12.3Depreciation and amortization


31.2



9.7



13.3



54.2Operating profit (loss)


67.6



97.4



(124.3
)


40.7Capital expenditures


35.5



13.2



26.0



74.7Property, equipment and leasehold improvements, net


161.7



50.4



102.7



314.8Fiscal 2008Net sales

$
975.3


$
891.6


$
11.9


$
1,878.8Store pre-opening and closing costs


2.7



5.7







8.4Depreciation and amortization


31.2



8.8



11.8



51.8Operating profit (loss)


65.6



98.0



(126.2
)


37.4Capital expenditures


11.5



15.1



11.1



37.7Property, equipment and leasehold improvements, net


167.5



36.3



93.7



297.5Fiscal 2007Net sales

$
915.3


$
935.3


$



$
1,850.6Store pre-opening and closing costs


5.6



5.5







11.1Depreciation and amortization


29.0



8.8



11.4



49.2Operating profit (loss)


53.5



93.1



(137.6
)


9.0Capital expenditures


31.5



6.8



19.8



58.1Property, equipment and leasehold improvements, net


183.9



36.8



91.1



311.8    Note 13 
    Quarterly
    Financial Information (Unaudited)    First


Second


Third


FourthFiscal 2009

Quarter


Quarter


Quarter


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

$
446.1


$
403.0


$
480.1


$
571.9Gross margin


206.8



191.8



235.3



248.6Net (loss) income


3.0



(11.7
)


10.2



20.4Net (loss) income per common share:Basic

$
0.12


$
(0.47
)

$
0.41


$
0.81Diluted


0.12



(0.47
)


0.40



0.79   71




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 13 
    Quarterly
    Financial Information (Unaudited) (Continued)  First


Second


Third


FourthFiscal 2008

Quarter


Quarter


Quarter


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

$
424.2


$
388.5


$
480.2


$
585.9Gross margin


200.6



177.4



230.5



263.9Net (loss) income


(1.7
)


(18.4
)


8.0



27.5Net (loss) income per common share:Basic

$
(0.07
)

$
(0.76
)

$
0.33


$
1.12Diluted


(0.07
)


(0.76
)


0.32



1.10    Note 14 
    Consolidating
    Financial Statements   72




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 14 
    Consolidating
    Financial Statements (Continued)  January 31, 2009


February 2, 2008Consolidating




Guarantor











GuarantorBalance Sheets

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


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

$
55.0


$
25.6






$
80.6


$
(1.0
)

$
26.4






$
25.4Inventories


206.5



222.9







429.4



208.5



263.7







472.2Deferred income taxes


16.2



7.3







23.5



20.1



6.3







26.4Prepaid expenses and other current assets


25.5



6.2







31.7



17.8



6.0







23.8Total current assets


303.2



262.0







565.2



245.4



302.4







547.8Property, equipment and leasehold improvements, net


165.5



149.3







314.8



142.8



154.7







297.5Goodwill, net


11.6











11.6



11.8











11.8Other assets


(3.9
)


13.4







9.5



12.8



(0.5
)






12.3Investment in subsidiaries


100.0







(100.0
)






70.9







(70.9
)


Intercompany receivable


307.7







(307.7
)






355.5







(355.5
)


Total assets

$
884.1


$
424.7


$
(407.7
)

$
901.1


$
839.2


$
456.6


$
(426.4
)

$
869.4Liabilities and Shareholders EquityCurrent liabilities:Accounts payable

$
158.6


$
(13.5
)





$
145.1


$
135.7


$
(6.3
)





$
129.4Accrued expenses


112.5



0.0







112.5



109.4



0.6







110.0Total current liabilities


271.1



(13.5
)






257.6



245.1



(5.7
)






239.4Long-term debt


66.0











66.0



100.0











100.0Long-term deferred income taxes


(3.4
)


6.6







3.2



(5.2
)


5.2







Lease obligations and other long-term liabilities


72.7



23.9







96.6



59.3



30.7







90.0Intercompany payable






307.7



(307.7
)










355.5



(355.5
)


Shareholders equity:Preferred stock






























Common stock


1.4











1.4



1.4











1.4Additional paid-in capital


211.7











211.7



194.6











194.6Retained earnings


310.4



100.0



(100.0
)


310.4



288.5



70.9



(70.9
)


288.5523.5



100.0



(100.0
)


523.5



484.5



70.9



(70.9
)


484.5Treasury stock, at cost


(45.8
)










(45.8
)


(44.5
)










(44.5
)Total shareholders equity


477.7



100.0



(100.0
)


477.7



440.0



70.9



(70.9
)


440.0Total liabilities and shareholders equity

$
884.1


$
424.7


$
(407.7
)

$
901.1


$
839.2


$
456.6


$
(426.4
)

$
869.4   73




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 14 
    Consolidating
    Financial Statements (Continued)  Fiscal Year-EndedJanuary 31, 2009


February 2, 2008Consolidating Statement




Guarantor











Guarantorof Operations

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


Consolidated(Dollars in millions)Net sales

$
1,029.0


$
1,447.8


$
(575.7
)

$
1,901.1


$
1,024.6


$
1,405.2


$
(551.0
)

$
1,878.8Cost of sales (exclusive of depreciation and amortization shown
    separately below)


613.7



980.6



(575.7
)


1,018.6



612.4



945.0



(551.0
)


1,006.4Gross margin


415.3



467.2







882.5



412.2



460.2







872.4Selling, general and administrative expenses


388.9



386.4







775.3



383.9



390.9







774.8Store pre-opening and closing costs


7.2



5.1







12.3



4.0



4.4







8.4Depreciation and amortization


28.3



25.9







54.2



25.8



26.0







51.8Operating (loss) profit


(9.1
)


49.8







40.7



(1.5
)


38.9







37.4Gain on purchase of senior subordinated notes


(4.2
)










(4.2
)














Interest expense, net


4.2



5.2







9.4



5.5



7.0







12.5(Loss) income before income taxes


(9.1
)


44.6







35.5



(7.0
)


31.9







24.9Income tax (benefit) provision


(1.9
)


15.5







13.6



(1.8
)


11.3







9.5(Loss) income before equity income


(7.2
)


29.1







21.9



(5.2
)


20.6







15.4Equity income from subsidiaries


29.1







(29.1
)






20.6







(20.6
)


Net income

$
21.9


$
29.1


$
(29.1
)

$
21.9


$
15.4


$
20.6


$
(20.6
)

$
15.4   Fiscal Year-Ended February 3, 2007GuarantorConsolidating Statement of Operations

Parent


Subsidiaries


Eliminations


Consolidated(Dollars in millions)Net sales

$
1,029.3


$
1,387.8


$
(566.5
)

$
1,850.6Cost of sales (exclusive of depreciation and amortization shown
    separately below)


605.8



951.5



(566.5
)


990.8Gross margin


423.5



436.3







859.8Selling, general and administrative expenses


395.4



395.1







790.5Store pre-opening and closing costs


4.5



6.6







11.1Depreciation and amortization


24.7



24.5







49.2Operating (loss) profit


(1.1
)


10.1







9.0Interest expense, net


6.5



9.1







15.6(Loss) income before income taxes


(7.6
)


1.0







(6.6
)Income tax benefit


(2.1
)


(1.6
)






(3.7
)(Loss) income before equity income and cumulative effect


(5.5
)


2.6







(2.9
)Equity income from subsidiaries


2.6







(2.6
)


(Loss) income before cumulative effect


(2.9
)


2.6



(2.6
)


(2.9
)Cumulative effect of accounting change, net of tax


1.0











1.0Net (loss) income

$
(1.9
)

$
2.6


$
(2.6
)

$
(1.9
)   74




---



##### 



Jo-Ann Stores,
    Inc.
  Notes to
    Consolidated Financial Statements (Continued)
   Note 14 
    Consolidating
    Financial Statements (Continued)  Fiscal Year-EndedJanuary 31, 2009


February 2, 2008Consolidating Statements of




Guarantor











GuarantorCash Flows

Parent


Subsidiaries


Eliminations


Consolidated


Parent


Subsidiaries


Eliminations


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

$
135.6


$
22.3


$



$
157.9


$
55.7


$
17.9


$



$
73.6Net cash flows used for investing activities:Capital expenditures


(51.6
)


(23.1
)






(74.7
)


(19.0
)


(18.7
)






(37.7
)Payment for acquisition, net of cash acquired


(3.1
)










(3.1
)


(11.7
)










(11.7
)Net cash used for investing activities


(54.7
)


(23.1
)






(77.8
)


(30.7
)


(18.7
)






(49.4
)Net cash flows used for financing activities:Purchase of senior subordinated notes


(29.5
)










(29.5
)














Net change in revolving credit facility


















(25.3
)










(25.3
)Proceeds from stock-based compensation plans


6.0











6.0



7.8











7.8Other, net


(1.4
)










(1.4
)


0.3











0.3Net cash used for financing activities


(24.9
)










(24.9
)


(17.2
)










(17.2
)Net increase (decrease) in cash and cash equivalents


56.0



(0.8
)






55.2



7.8



(0.8
)






7.0Cash and cash equivalents at beginning of year


(1.0
)


26.4







25.4



(8.8
)


27.2







18.4Cash and cash equivalents at end of year

$
55.0


$
25.6


$



$
80.6


$
(1.0
)

$
26.4


$



$
25.4   Fiscal Year-Ended February 3, 2007GuarantorConsolidating Statements of Cash Flows

Parent


Subsidiaries


Eliminations


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

$
54.8


$
51.0


$



$
105.8Net cash flows used for investing activities:Capital expenditures


(22.2
)


(35.9
)






(58.1
)Net proceeds from sale-leaseback transaction






24.7







24.7Net cash used for investing activities


(22.2
)


(11.2
)






(33.4
)Net cash flows used for financing activities:Net change in revolving credit facility


(78.4
)










(78.4
)Dividends paid


15.0



(15.0
)






Proceeds from stock-based compensation plans


5.2











5.2Other, net


1.3











1.3Net cash used for financing activities


(56.9
)


(15.0
)






(71.9
)Net (decrease) increase in cash and cash equivalents


(24.3
)


24.8







0.5Cash and cash equivalents at beginning of year


15.5



2.4







17.9Cash and cash equivalents at end of year

$
(8.8
)

$
27.2


$



$
18.4   75




---



##### 



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)
      Changes in Internal Control Over Financial
    Reporting
 76




---



##### 



Report of
    Independent Registered Public Accounting Firm
                 
    77




---



##### 



Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Form 10-K Regulation S-K. Regulation S-K
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Equity
    Compensation Plan Information
   78




---



##### 



Number of CommonShares RemainingAvailable for FutureIssuance UnderNumber of Common



EquityShares to be Issued

Weighted-Average

Compensation PlansUpon Exercise 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),(2),(3)


1,795,704


$
18.04



2,784,223     (1)
    
    Column (a) represents the number of common shares that may
    be issued in connection with the exercise or conversion of 5,440
    outstanding stock options, and 41,520 restricted stock units
    granted under our 2008 Plan, 1,736,180 outstanding stock options
    and 9,339 stock equivalent units granted under our 1998 Plan,
    and 3,225 outstanding stock options granted under our Directors
    Stock Option Plan. Our 1998 Plan and Directors Stock Option Plan
    have terminated, but the terminations do not affect awards that
    are currently outstanding under these plans. The shares subject
    to outstanding awards under the 1998 Plan could be forfeited and
    therefore become available for issuance under the 2008 Plan.
    Column (a) excludes 62,236 shares that were issued at
    the end of the most recent ASOP purchase period, which began on
    October 1, 2008 and ended on March 31, 2009, after the
    end of our fiscal 2009.(2)
    
    The weighted average exercise price of $18.04 takes into account
    the common shares issuable upon vesting of 41,520 restricted
    stock units issued to our directors under our 2008 Plan and the
    common shares issuable upon vesting of 9,339 stock equivalent
    units issued to Mr. Webb under our 1998 Plan. These
    restricted stock units and stock equivalent units have no
    exercise price. The weighted average exercise price of solely
    outstanding stock options is $18.57.(3)
    
    Column (c) includes 2,184,223 common shares under our 2008
    Plan and 600,000 common shares that were available under the
    2008 ASOP at the end of our fiscal 2009, including the
    62,236 shares described in footnote (1), above.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  180-day
    Item 14.
    Principal
    Accountant Fees and Services   79




---



##### 



PART IV
  Item 15.
    Exhibits and
    Financial Statement Schedules    Financial Statements
  Form 10-K
  Financial Statement Schedules
    Exhibits
  Form 10-K, Form 10-K.
 80




---



##### 



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 companys
    Form 10-K
    filed with the Commission on April 17, 2008 and
    incorporated herein by reference)3
.2

Amended and Restated Code of Regulations (filed as
    Exhibit 3.2 to the companys
    Form 10-K
    filed with the Commission on April 17, 2008 and
    incorporated herein by reference)4
.1

Indenture between the company 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 company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 10.3 to the companys
    Form 10-Q
    filed with the Commission on December 13, 2007 and
    incorporated herein by reference)*10
.2

Schedule to Jo-Ann Stores, Inc. Supplemental Retirement Benefit
    Plan, effective as of November 13, 2007 (filed as
    Exhibit 10.4 to the companys
    Form 10-Q
    filed with the Commission on December 13, 2007 and
    incorporated herein by reference)*10
.3

Schedule to Jo-Ann Stores, Inc. Supplemental Retirement Benefit
    Plan, effective as of October 15, 2008 (filed as
    Exhibit 10.2 to the companys
    Form 8-K
    filed with the Commission on October 15, 2008 and
    incorporated herein by reference)*10
.4

Employment Agreement dated October 21, 2005 between the
    company and Alan Rosskamm (filed as Exhibit 10.1 to the
    companys
    Form 8-K
    filed with the Commission on October 26, 2005 and
    incorporated herein by reference)*10
.5

Employment Agreement dated October 21, 2005 between the
    company and David Holmberg (filed as Exhibit 10.2 to the
    companys
    Form 8-K
    filed with the Commission on October 26, 2005 and
    incorporated herein by reference)*10
.6

Jo-Ann Stores, Inc. (formerly Fabri-Centers of America, Inc.)
    1998 Incentive Compensation Plan, as amended, dated
    November 13, 2007 (filed as Exhibit 10.6 to the
    companys
    Form 10-Q
    filed with the Commission on December 13, 2007 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 company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) (filed as Exhibit 10.8 to the companys
    Form 10-K
    filed with the Commission on April 19, 2007 and
    incorporated herein by reference)*10
.9

Credit Agreement dated as of April 24, 2001 among the
    company, 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 Agent (filed as Exhibit 10.9 to the
    companys
    Form 10-K
    filed with the Commission on April 19, 2007 and
    incorporated herein by reference)10
.10

First Amendment to Credit Agreement dated as of April 24,
    2001 (filed as Exhibit 10.10 to the companys
    Form 10-K
    filed with the Commission on April 19, 2007 and
    incorporated herein by reference) 81




---



##### 



ExhibitNumber

Exhibit Description10
.11

Second Amendment to Credit Agreement dated as of March 17,
    2003 (filed as Exhibit 10.13 to the companys
    Form 10-K
    filed with the Commission on April 15, 2004 and
    incorporated herein by reference)10
.12

Third Amendment to Credit Agreement dated as of
    February 18, 2004 (filed as Exhibit 10.14 to the
    company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 company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 companys
    Form 10-K
    filed with the Commission on April 13, 2006 and
    incorporated herein by reference)10
.15

Sixth Amendment to Credit Agreement dated November 5, 2007
    (filed as Exhibit 10.1 to the companys
    Form 10-Q
    filed with the Commission on December 13, 2007 and
    incorporated herein by reference)10
.16

Jo-Ann Stores, Inc. Deferred Compensation Plan, as amended on
    January 30, 2008 (filed as Exhibit 10.16 to the
    companys
    Form 10-K
    filed with the Commission on April 17, 2008 and
    incorporated herein by reference)*10
.17

Fabri-Centers of America, Inc. 1996 Stock Option Plan for
    Non-Employee Directors (filed as Exhibit 10.16 to the
    companys
    Form 10-K
    filed with the Commission on April 19, 2007 and
    incorporated herein by reference)*10
.18

Form of Restricted Stock Award Agreement of the company (filed
    as Exhibit 10.1 to the companys
    Form 8-K
    filed with the Commission on November 23, 2005 and
    incorporated herein by reference)*10
.19

Form of Notice of Grant of Non-Qualified Stock Option (filed as
    Exhibit 10.2 to the companys
    Form 8-K
    filed with the Commission on November 23, 2005 and
    incorporated herein by reference)*10
.20

Letter Agreement entered into on November 23, 2005 between
    the company and David Holmberg regarding
    Mr. Holmbergs employment with the company (filed as
    Exhibit 10.22 to the company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 company 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 company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
    companys
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.23

Amended Employment Agreement dated February 19, 2008
    between the company and Darrell Webb (filed as
    Exhibit 10.25 to the companys
    Form 10-K
    filed with the Commission on April 17, 2008 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
    companys
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.25

Amended Employment Agreement dated February 19, 2008
    between the company and Travis Smith (filed as
    Exhibit 10.27 to the companys
    Form 10-K
    filed with the Commission on April 17, 2008 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
    companys
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.27

Amended Employment Agreement dated February 19, 2008
    between the company and James Kerr (filed as Exhibit 10.29
    to the companys
    Form 10-K
    filed with the Commission on April 17, 2008 and
    incorporated herein by reference)* 82




---



##### 



ExhibitNumber

Exhibit Description10
.28

Split Dollar Insurance Agreement dated July 27, 2006
    between the company and James Kerr (filed as Exhibit 10.7
    to the company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 companys
    Form 10-Q
    filed with the Commission on September 7, 2006 and
    incorporated herein by reference)*10
.30

Lease Agreement dated October 19, 2006 between BPVisalia
    LLC, as Landlord, and Jo-Ann Stores Supply Chain Management,
    Inc., as Tenant (filed as Exhibit 10.1 to the
    companys
    Form 8-K
    filed with the Commission on October 25, 2006 and
    incorporated herein by reference)10
.31

Split Dollar Insurance Agreement dated August 14, 2007
    between the company and Darrell Webb (filed as Exhibit 10.1
    to the companys
    Form 8-K
    filed with the Commission on August 20, 2007 and
    incorporated herein by reference)*10
.32

Split Dollar Insurance Agreement dated August 14, 2007
    between the company and Travis Smith (filed as Exhibit 10.2
    to the companys
    Form 8-K
    filed with the Commission on August 20, 2007 and
    incorporated herein by reference)*10
.33

Letter Agreement entered into on September 12, 2007 between
    the company and David Holmberg regarding the termination of
    Mr. Holmbergs employment with the company (filed as
    Exhibit 10.5 to the companys
    Form 10-Q
    filed with the Commission on December 13, 2007 and
    incorporated herein by reference)*10
.34

Employment Agreement dated November 19, 2007 between the
    company and Kenneth Haverkost (filed as Exhibit 10.2 to the
    companys
    Form 10-Q
    filed with the Commission on December 13, 2007 and
    incorporated herein by reference)*10
.35

Form of Director Indemnification Agreements (filed as
    Exhibit 10.37 to the companys
    Form 10-K
    filed with the Commission on April 17, 2008 and
    incorporated herein by reference)10
.36

Amended and Restated Credit Agreement, dated as of
    September 5, 2008, among the company as Lead Borrower, the
    Lenders party thereto, Bank of America, N.A., as Issuing Bank,
    Administrative Agent and Collateral Agent, Wells Fargo Retail
    Finance, LLC, National City Business Credit, Inc. and U.S. Bank
    National Association, as Co-Documentation Agents, and Banc of
    America Securities LLC, as Sole Lead Arranger and Book Manager
    (filed as Exhibit 10.1 to the companys
    Form 10-Q
    filed with the Commission on December 11, 2008 and
    incorporated herein by reference)10
.37

Split Dollar Insurance Agreement dated October 15, 2008
    between the company and Kenneth Haverkost (filed as
    Exhibit 10.1 to the companys
    Form 8-K
    filed with the Commission on October 15, 2008 and
    incorporated herein by reference)*10
.38

Jo-Ann Stores, Inc. 2008 Incentive Compensation Plan (filed as
    Appendix A to the companys 2008 Proxy Statement filed
    with the Commission on April 28, 2008 and incorporated
    herein by reference)*10
.39

Jo-Ann Stores, Inc. 2008 Associate Stock Ownership Plan (filed
    as Appendix B to the companys 2008 Proxy Statement
    filed with the Commission on April 28, 2008 and
    incorporated herein by reference)*10
.40

Employment Agreement dated March 16, 2009 between the
    company and Darrell Webb (filed as Exhibit 10.1 to the
    companys
    Form 8-K
    filed with the Commission on March 18, 2009 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 83




---



##### 



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/  Joseph
    Depinto*Joseph
    DePinto

Director/s/  Ira
    Gumberg*Ira
    Gumberg

Director/s/  Patricia
    Morrison*Patricia
    Morrison

Director/s/  Frank
    Newman*Frank
    Newman

Director/s/  David
    Perdue*David
    Perdue

Director/s/  Beryl
    Raff*Beryl
    Raff

Director/s/  Alan
    Rosskamm*Alan
    Rosskamm

Director/s/  Tracey
    Travis*Tracey
    Travis

Director   Form 10-K
   By:
    /s/  James
    Kerr   Attorney-in-Fact
 84