Q4 2004 Hancock Fabrics Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, ladies and gentlemen, and welcome to the fourth quarter 2004 Hancock Fabrics conference call. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded for replay purposes, and you can access that replay online by going to hancockfabrics.com, clicking on Investor Relations and then clicking on Conference Call. I would now like to read the forward-looking statement.

Statements made in the course of this conference call that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's 10-Ks and Form 10-Qs. Copies of these filings may be obtained by contacting the Company or SEC.

I would now like to turn the presentation over to your host for today's call, Ms. Jane Aggers, President and Chief Executive Officer. Please proceed.

JANE AGGERS, PRESIDENT, CEO, HANCOCK FABRICS, INC.: Good morning to all of you. It is an honor and privilege for me for the first time as President and CEO of Hancock Fabrics to welcome our conference callers and webcast participants to a review of Hancock Fabrics' fourth quarter and year-end 2004 results.

Hancock Fabrics is a Company with a proud heritage, strong balance sheet, excellent internal and excellent -- and external resources, participating in a vibrant and growing creative industry. I have joined Hancock Fabrics with a deep respect for its past, a deep appreciation of its expertise and tremendous enthusiasm for the great opportunities ahead. I believe in this business, appreciate and respect the customers we serve, and am awed by the talent and expertise within the Company. The bottom line, I'm thrilled to be here.

Yes, 2004 with disappointment from an earnings point of view; however, 2004 was a remarkable year of extraordinary achievements also. Two of the most significant infrastructure improvements in the Company's 48 year history were completed both on-time and both under budget; however, they carried a price. The physical move of the new corporate offices and distribution center and the corporatewide implementation of point-of-sale systems represented huge distractions for the entire organization. Both initiatives were needed and perhaps long overdue. From what I have learned in the short period of time I have been here it is obvious both initiatives had major impacts on the 2004 operating business.

Primarily merchandise flow was disrupted, and the impact of changing the way we do business to coincide with the requirements of an integrated POS system impacted the management group significantly. The bottom line, the stores suffered and our customer was not served. Let me assure you we're totally committed to reconnecting with our customers and are focused on meeting that goal.

We are reevaluating everything we do from the customer's point of view from the merchandise we carry to the store layout and merchandise presentation, and to the way we advertise and promote. We will serve our existing customers better. And eventually we will appeal to a new group of selling and decorating customers. We are after all America's fabric store.

As you can imagine having been here less than a month, I'm still acting asking a lot of questions and reviewing existing plans for the coming months. By the end of this week I will have met all of our District Managers and over one-third of our Store Managers. Their input has been very valuable.

I'm excited about several things that are either in place or in progress, like the introduction of Laurie Smith Home Decorating -- you know that name from Trading Spaces -- and a renewed emphasis on promotional decorating and promotional apparel fabrics. Our commitment to quilting continues to improve too, with several new lines coming from Martha Pullen and Phyllis Hoffman, and a new line of St. Jude Fabric to support the 2005 Quilt of Dreams project. We're thrilled that the American Sewing Guild has nationally endorsed the 2005 Quilt of Dreams as their primary project this year.

At an operational level we work -- work continues on improving our use of point-of-sale information to make more informed merchandising and marketing decisions. Point-of-sale is a new tool box for this organization where the last stores is coming up live the last fiscal week of 2004. Therefore we will not have a full year of store data …