Hancock Fabrics, Inc. (NYSE:HKF) today announced its unaudited results for the first fiscal quarter of 2000.

Sales for the 13 weeks ended April 30, 2000 increased 1.8% to $98.1 million from $96.4 million in the same quarter of 1999. Net earnings increased to $2.2 million, or $.12 per diluted share, compared with $1.1 million, or $.06 per diluted share, in the first quarter of 1999.

In commenting on the results, Larry G. Kirk, Chief Executive Officer, stated, "Comparable store sales gains and recovering gross margins were the primary contributors to the improved results in the first quarter. Comparable sales increased 3.5% from a year ago, and gross margins were sharply higher than 1999's first quarter when the weakness in apparel goods pricing was most intense. Despite continued pressures on payroll in a full-employment economy, SG&A expenses as a percent of sales were slightly lower as a result of the sales leverage. Inventories continue to decline in total and on a comparable basis, and bank debt was reduced from the preceding quarter and from a year ago."

"Stability in pricing in recent months has been a welcome relief from the deflationary pressure on sales and gross margins that persisted in 1998 and much of 1999. At the same time, the Company also is benefiting from the store repositioning strategy, aggressive remodeling and significant product mix changes that continue even now. The acquisitions of Northwest Fabrics and Mae's Fabrics have been fully integrated, and the disruptions of a national signage conversion are now behind us. For the first time in quite a while, we've been able to concentrate more on improving our everyday operations, and it's beginning to show," Kirk continued.

"The key for Hancock Fabrics in recent quarters has been its resiliency. The Company has contended with a very difficult industry environment without having to sacrifice or curtail the internal initiatives that we believed were important - store positioning, facility upgrading, strategic acquisitions, major mix adjustments and brand development. Despite the accelerated capital expenditures and an ongoing share repurchase program, the Company's debt level has continued to decline. In seven consecutive share repurchase authorizations, Hancock has bought back 38% of its outstanding shares, including 550,000 shares in the quarter just completed. The Company's debt on April 30, 2000 was $28 million, or 27% of total capitalization," Kirk concluded.

During the quarter, Hancock opened five stores and closed six. At April 30, 2000, the Company operated 452 stores in 42 states and supplied more than 100 independent wholesale customers.

Hancock Fabrics, Inc. is a retail and wholesale merchant of fabrics, crafts and related home sewing and home decorating accessories.

Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from projections. These risks and uncertainties include, but are not limited to, general economic trends, changes in consumer demand or purchase patterns, delays or interruptions in the flow of merchandise between the Company's suppliers and/or its distribution center and its stores, a disruption in the Company's data processing services, costs and delays in acquiring or developing new store sites, and other contingencies discussed in the Company's Securities and Exchange Commission filings. Hancock undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

(000's omitted, except for per share amounts)

13 Weeks 13 Weeks
04-30-00 05-02-99
-------- --------

Sales $ 98,123 $ 96,365

Cost of Goods Sold
After LIFO Effect 50,158 51,069
---------- ----------

Gross Profit 47,965 45,296

Selling, G&A 42,624 41,917
Dep'n/Amort 1,269 1,156
---------- ----------
43,893 43,073
---------- ----------
Earnings Before
Interest and Taxes 4,072 2,223

Interest expense 691 535
Interest income (39) (41)
---------- ----------

Earnings Before
Income Taxes 3,420 1,729

Income taxes 1,237 625
---------- ----------

Net earnings $ 2,183 $ 1,104
========== ==========

Earnings Per Share

Basic $ 0.12 $ 0.06
========== ==========

Diluted $ 0.12 $ 0.06
========== ==========

Average Shares
Outstanding (000's)

Basic 17,492 18,149

Diluted 17,492 18,149

LIFO Charge (Credit)
Included in
Cost of Goods Sold $ 0 $ (200)