William Blair & Company initiated research coverage of JOANN Inc. (JOAN $10.99), the largest retailer of sewing products and accessories in the United States and a large and growing player in the arts and crafts category.
Analyst Daniel Hofkin estimated the company would generate adjusted earnings per share of $2.55 in 2021 and $2.85 in 2022. Beginning in 2022, he forecast that JOANN should be able to generate at least 2%-3% annual revenue growth, driven by increased penetration in arts and crafts, rising e-commerce penetration, and store refreshes/relocations.
“JOANN offers the deepest assortment of products and accessories in sewing, with a growing offering of proprietary products and services,” Hofkin said. “The number of active sewists in the United States has grown at a 7% compound annual rate since 2012, to 33 million. Growth has been aided by entry of the large and growing base of increasingly diverse millennials; new products/services; rapid expansion of online marketplaces such as Etsy, eBay, and Shopify; and the affordability and accessibility of the activities. These trends are expected to continue to support a healthy outlook for creative products even beyond the COVID-19 pandemic.”
Hofkin continued, “JOANN’s stores offer an engaging shopping experience designed to inspire customers and fuel their creativity. JOANN is also a key source for individuals and small business owners who rely on the company’s products to create, sell, or donate their own merchandise. Marketplace sellers often buy in bulk and benefit from JOANN’s helpful educational content, project inspiration, and industry-leading product assortment. While management believes—and we agree—that the existing store base is adequate, at least in terms of quantity, significant opportunity exists to optimize JOANN’s store fleet through light-touch store refreshes, more significant remodels, and relocations.”
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William Blair or an affiliate was a manager or co-manager of a public offering of equity securities of JOANN Inc. within the prior 12 months.
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William Blair or an affiliate received compensation for investment banking services or non-investment-banking services from JOANN Inc. within the last 12 months. JOANN Inc. is or was, within the last 12 months, an investment banking client of William Blair and/or one or more of its affiliates.
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Current Ratings Distribution (as of 4/6/21)
Outperform (Buy): 74%
Market Perform (Hold): 25%
Underperform (Sell): 1%
Inv. Banking Relationships*
Outperform (Buy): 27%
Market Perform (Hold): 11%
Underperform (Sell): 0%
* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.
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