Jo-Ann Stores Inc. (JAS), the leading national fabric and craft retailer with nearly 800 locations in 47 states, announced lower year-over-year fourth-quarter results.

The company said profit declined 20.6 percent for the quarter, to $20.4 million, or 79 cents per share, from $27.5 million, or $1.10 per share last year.

Results for the quarter were buoyed by a 5 cent gain due to the repurchasing of some of the company’s senior notes. Analysts polled by Thomson Reuters, who typically don’t include one-time items in their estimates, were expecting earnings of 77 cents per share for the quarter.

Sales declined 2.4 percent from last year to $571.9 million, as same-store sales dropped 2.9 percent.

Results for the company’s full fiscal year showed modest growth though. Excluding one-time items JAS earned 76 cents per share compared to 62 cents per share last year. Sales grew to $1.9 billion from $1.88 billion.

Chairman, President and CEO Darrell Webb said the solid earnings and cash flow improvements made by the company were a result of key initiatives that succeeded in growing sales, controlling expenses and managing inventory.

He said the store remodel and optimization programs continued to generate incremental sales while the core sewing and craft business delivered consistent sales during the year despite the deteriorating economy.

The fourth quarter was very challenging. In addition to being down year-over-year, same-store sales also fell on a sequential basis to 2.9 percent from 1.5 percent in the third quarter indicating that further weakness may still be on the horizon.

Customer transactions and were also both weaker in the fourth quarter compared to the prior year. Mr. Webb said that as we look ahead to fiscal 2010 we are hopeful the economy will begin to improve in the second half but believe it prudent to expect and plan for negative trends in both customer transactions and average ticket in the near term.

Therefore, Mr. Webb says the company will not assume any improvement in sales trends for the year and will instead focus on the elements of the business it can control such as expenses, inventory and customer experience.

He believes that among the key initiatives for fiscal 2010, margin expansion provides the most significant opportunity to improve financial results due to a number of reasons.

He said the percentage of product the company sources from Asia will increase again this year, while the inflationary pressure on those products has sharply reversed creating product cost deflation. Freight expense has also sharply decreased as oil prices fall.

The company will also buy less fashion and seasonable merchandise which should reduce its exposure to promotional and clearance markdowns. JAS said it expects to earn between 70 cents and 85 cents per share for fiscal 2010, below Street estimates of 93 cents per share. The share price reflects analysts’ disappointment.

This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.