Joann is pursuing a $200 million annual cost reduction plan that aims to be fully delivered by early fiscal 2025, President and CEO Wade Miquelon said on an earnings call for its fiscal Q3 2023. About half of the reduction will come from supply chain savings, largely driven by reductions in ocean freight costs. Another 30% will be from cost of goods sold improvements, while the remainder will be from reductions to overhead costs.
The retailer expects to realize its first $15 million to $20 million in savings in Q4 2023 due to lower ocean expenses. The company recorded $18.5 million in excess import freight costs during Q3 alone, but pressure on this front is already easing.
“Excess import freight costs have now effectively transitioned from headwinds to tailwinds and we expect that will be clearly reflected in the fourth quarter from a P&L perspective,” said Scott Sekella, CFO of Joann on the call.
The retailer also plans to “adjust the number of stores” it plans to open or remodel in the coming years, though it is not “turning the engine off,” according to Miquelon. Additionally, while he noted that there may be “some opportunity” when it comes to labor costs, that aspect of operations is “something that we are going to protect at all costs.”
“We say that everything is on the table, but one of the things that’s very sacred to us is making sure [customers] have a great in-store experience,” said Miquelon during the call. “So we are not going to do anything on our store labor front that’s going to compromise where we are right now.”
The savings could help Joann return to profitability following disappointing Q3 results. While Halloween item sales rose 8% year-over-year, that was not enough to offset a 7.9% decline in net sales. The retailer experienced a net loss of $17.5 million compared to net income of $22.8 million during the same quarter last year.