Thu Oct 28 00:30:12 EDT 2010

Jo-Ann Stores Inc. (JAS)

Specialty Stores
Overall Grade: JAS 62.2

JAS Overview
Company Performs Well In Fundamental Analysis -
Stock Price 10/26/2010
MarketGrader currently has a BUY rating on Jo-
Ann Stores Inc. (JAS), based on a final overall
Earnings Estimates
grade of 62.2 scored by the company's
fundamental analysis. Jo-Ann Stores Inc. scores Last Earnings Release 08/25/2010
at the 87th percentile among all 5734 U.S. listed Last Qtr. Actual vs. Est. $0.20 / $0.02
equities currently followed by MarketGrader. Our Next Release 11/29/2010
present rating dates to June 6, 2010, when it was Year Ending 01/31/2012
upgraded from a HOLD. Relative to the Specialty Year Ending 10/31/2010
Stores sub-industry, which is comprised of 37
companies, Jo-Ann Stores Inc.'s grade of 62.2 ranks fourth. The industry grade leader is
Winmark Corp (WINA) with an overall grade of 73.2. The stock has performed poorly in the last
six months in relative terms, down 11.61% compared with the Specialty Stores sub-industry,
down 10.26% and the S&P 500 Index, down 1.96%. Please go to pages two and three of this
report for a complete breakdown of JAS's fundamental analysis.
$42.00
N/A
$3.42
$1.03
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reports and it does not include any analyst
estimates, price targets or any other form of forward
looking information. All numbers are then broken
down into four unique grading categories: Growth,
Value, Profitability and Cash Flow. Each category
contains six fundamental indicators, determined by
the company's industry. Some of the figures used in
the creation of these indicators (for example
earnings from operations or cash flow), are not
incorporated in the analysis as reported by the
companies, but built by the MarketGrader system
from its own methodology to ensure identical
accounting standards across all companies. Each of
the 24 fundamental indicators is individually graded
based on a nine letter scale of A+ to F. The grade
composition chart on the left breaks down the
analysis of the company presented in this report,
allowing you to see the indicators used. It provides a
bird's eye view of the company's strengths and
weaknesses. Pages two and three of the report
explain the factors contributing to each indicator's
grade. Finally, the MarketGrader system compiles all
24 fundamental indicators into an overall company
grade, on a 0 to 100 scale. This final grade
determines the MarketGrader Buy, Hold or Sell
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Grade JAS 18 Month Price & Grade History Price

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 Thu Oct 28 00:30:12 EDT 2010

Jo-Ann Stores Inc. (JAS)

Specialty Stores
Overall Grade: JAS 62.2

Fundamental Analysis Grades

Growth: Continued Average Growth Performance Growth B
Jo-Ann Stores Inc. 's poor top and bottom line growth in recent years seems to Market Growth LT D
be improving slightly recently. Compared to full year results published three
Market Growth ST B
years before, the company's annual revenue grew 8.3% during its fiscal year
ended January 31, 2010 while year to year quarterly sales increased 4.7% in its Growth Potential D
most recently reported quarter. During its most recent quarter the company
Rel. Price Str. B-
reversed a loss posted in the same quarter a year ago with a $5.4 million profit;
its annual net income grew 1,362.1 over a three year period. JAS 's ability to Earnings Momentum A
exceed earnings estimates with its latest earnings release on August 25, 2010
Earnings Surprise A+
generated momentum for the stock, reflected by a 12.9% price increase in the
days surrounding the announcement. The company is averaging a 204.7%
earnings surprise (difference between expected and actual earnings) over its last
six reported quarterly figures, which means it's consistently managing to beat
quarterly Wall Street estimates, an important driver of stock price momentum.

Value: Acceptable Valuation Indicators Value A-

JAS trades at about 12.88 times earnings per basic share (excluding Capital Structure A+
extraordinary items); this compares very favorably to the MarketGrader-
calculated optimum PE ratio of 176.3, based on a historical 76.46% EPS growth P/E Analysis A+
rate, suggesting the stock is significantly undervalued. Our optimum PE Price/Book Ratio A+
Analysis assigns each stock the highest possible valuation afforded by its long
term EPS growth rate; this historical growth rate measures the average year-to- Price/Cash Flow A
year change in earnings per share for the company's last eight quarters (when Price/Sales Ratio B+
available). While management has done a good job with the company's
earnings per share growth, a lack of top line growth poses a near term threat to Market Value F
earnings per share sustainability. The stock trades at 0.00 times tangible book
value per share (tangible book value is based on the company's common equity
minus intangibles such as goodwill); this is an attractive valuation were
management to undertake steps in an attempt to unlock the true value of assets
on the balance sheet. It trades also at 6.97 times cash flow per share, a sign
that investors are assigning relatively little value to the company's non-cash
assets and its earnings potential. JAS trades favorably at 0.54 times trailing 12-
month sales, a 9.67% discount to the Specialty Stores industry average price to
sales ratio of 0.60. The company's market capitalization of $1,101.37 million is
55.34 times its latest quarterly net income (including depreciation), representing
an exceptionally rich valuation.

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 Thu Oct 28 00:30:12 EDT 2010

Jo-Ann Stores Inc. (JAS)

Specialty Stores
Overall Grade: JAS 62.2

Fundamental Analysis Grades

Profitability: Mediocre Operating Results Profitability B-
Jo-Ann Stores Inc. displays significant weakness in operating performance with Asset Utilization B-
a dismal 14.8% return on equity. The company has no debt, which seems
Capital Utilization D
prudent considering its poor return on equity. The balance sheet looks
exceptionally sound considering the company had $126.10 million in cash on Operating Margins B-
hand in the most recent quarter. The company's latest annual net income of
Relative Margins B+
$66.6 million (for fiscal year ended January 31, 2010 ) compared to its $ 1,000.4
million in assets is an indication of average operating efficiency, reflected in a Return on Equity D
mediocre Asset Utilization indicator grade. Some weakness can be attributed to
Quality of Revenues B-
JAS's operating margins of 4.2%, 1% higher than the 6.99% Specialty Stores
Industry average.

Cash Flow: Acceptable Cash Situation Leaves Room Cash Flow B

for Improvement
Cash Flow Growth F
JAS displays negative year-to-year cash flow growth going from positive to
EBITDA Margin C
negative cash flow of -$2.7 million during its latest reported period and a barely
satisfactory EBITDA (earnings before interest, taxes, depreciation and Debt/Cash Flow A+
amortization) margin of 0%. The company maintains a very conservative capital
Interest Coverage A-
structure considering it has no debt and it generated -$2.7 million in cash flow in
its last quarter ended July 31, 2010; this compares to $4.2 million for the same Economic Value A-
quarter a year before. JAS's economic value added is extraordinary based on a
Retention Rate B
low cost of debt and high cost of equity, when compared to a 25.00% return on
investment. The company is financing its moderate growth at least in part
organically supported by an average 14.79% reinvestment rate over the last four
quarters.

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 Thu Oct 28 00:30:12 EDT 2010

Jo-Ann Stores Inc. (JAS)

Specialty Stores
Overall Grade: JAS 62.2
Financials Last Qtr. Last Fiscal Yr.
Profile (07/31/2010) (01/31/2010)

Jo-Ann Stores, Inc. operates as a specialty retailer of fabrics and crafts in the United States. It Income Statement
operates retail stores under the names of Jo-Ann Fabrics and Crafts, and Jo-Ann, which offer a Revenue $439.30 $1,990.70
range of merchandise used in sewing, crafting, and home decorating projects, including
fabrics, notions, crafts, frames, paper crafting material, artificial floral, home accents, finished Net Income $5.40 $66.60
seasonal, and home decor merchandise. The company also sells its products through its Web
site, Joann.com. As of January 30, 2010, it operated 746 retail stores in 48 states. The company EPS $0.21 $2.60
was founded in 1943 and is based in Hudson, Ohio.
Cash Flow ($2.70) $122.90

Balance Sheet
Total Assets $954.20 $1,000.40

Total Debt N/A $47.50

All numbers in millions except for EPS

Ratios Grades
Price/Earnings 12.9 A+

Price/Book 2.0 A+

Price/Cash Flow 7.0 A

Price/Sales 0.5 B+

Debt/Cash Flow 0.0 A+

Revenue - 3Y Net Income - 3Y
Return On Equity 14.8% D

Operating Margin 4.2% B-

Share Data
Price (10/26/2010) $42.00

52 Week High $47.09

52 Week Low $26.35

Average 3 Month Volume 364,140

Total Debt - 3Y Free Cash Flow* - 3Y
Market Cap. $1,101.37 M

Shares Outstanding 27,024,000

Float 27,024,000

* Calculated as Net Cash Flow Minus Cash Dividends

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 Thu Oct 28 00:30:12 EDT 2010

Jo-Ann Stores Inc. (JAS)

Specialty Stores
Overall Grade: JAS 62.2

Stock Performance - 1 Year (%) 50 & 200 Day Moving Average - 1 Year

JAS MG Index JAS 200 Day Moving Avg

Specialty Stores S&P 500 50 Day Moving Avg

6 YR Stock Price Market Share

Share% Company 1Y% 3Y% Grade
(total 37)
1 26.2 Staples Inc. 25.8 22.1 51.5
2 13.1 Office Depot Inc 16.2 18.3 24.1
3 7.8 Officemax Inc 9.2 10.9 31.2
4 6.3 Barnes & Noble Inc N/A N/A 22.6
5 5.8 PetSmart Inc 5.7 5.2 56.6
6 4.8 Dick's Sporting Goods Inc. 4.6 3.8 51.1
7 3.5 Signet Jewelers Ltd 3.7 4.5 41.0
8 3.5 Tractor Supply Co 3.4 2.9 65.2
9 3.0 Borders Group Inc 3.7 5.0 15.2
13 2.1 Jo-Ann Stores Inc.-[13/37] 2.1 2.3 62.2

Peer Comparison
Company Grade Rating Revenue* EPS* Earnings PE Ratio ROE Market Cap
(total 37) in millions Surprise** in millions
Winmark Corp 73.2 $11.0 $0.54 26.3% 19.5 44.3% $167.9
Tractor Supply Co 65.2 $829.1 $0.44 9.0% 18.5 18.4% $2,896.0
Hibbett Sports Inc 62.6 $139.8 $0.14 0.7% 18.9 21.3% $790.8
Jo-Ann Stores Inc.-[4/37] 62.2 $439.3 $0.21 204.7% 12.9 14.8% $1,101.4
Ulta Salon Cosmetics & Fragrance Inc 59.6 $321.8 $0.22 43.3% 34.0 16.9% $1,902.9
PetSmart Inc 56.6 $1,390.5 $0.41 11.8% 20.5 18.4% $4,421.0
Big 5 Sporting Goods Corp 54.3 $219.8 $0.22 37.7% 13.0 17.1% $317.8
Staples Inc. 51.5 $5,534.2 $0.18 1.5% 17.9 12.7% $15,032.4
Tandy Leather Factory Inc 51.2 $14.4 $0.10 -2.2% 12.6 13.9% $46.6
Dick's Sporting Goods Inc. 51.1 $1,226.1 $0.44 40.7% 20.5 13.8% $3,390.4
*As reported for most recent quarter **Average of last six quarters
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