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Creative Leisure News
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March 5, 2001 TABLE OF CONTENTSCOMMENTARYCreative Leisure News is now offering a new, free service to subscribers:You've put up a website for your business, but in the back of your mind you wonder how good it is. The designers who put it online are proud of it, but like so many things with computer gurus, you take their word for it because you don't know that much about computers. Is your site effective? How do you really know? Wouldn't you like to receive a knowledgeable -- confidential -- opinion about your site? What's good, what's bad, and how could it be improved without costing a fortune? Now you can. Creative Leisure News has made arrangements with Carlisle Communications for Lynn Carlisle to go through your site and give you a one-page, confidential appraisal of your site -- and suggestions for improvement, if necessary. She will do this for you, for free, if you are a paid subscriber to Creative Leisure News. Why Lynn Carlisle? Because she is one of the most knowledgeable people in the industry regarding web sites. She was the webmaster for Joann.com, the site for Jo-Ann Stores, before it changed to a true e-commerce site under Idea Forest. She was also the webmaster for CraftNetVillage, the original portal site for our industry. To see her recent work, look at Duncan's redesigned site, duncancrafts.com. Lynn has already given me numerous suggestions for ways to improve CLN's site. You'll be seeing some of those suggestions here soon. If you'd like Lynn to take a confidential look at your site, just call me at 309-925-5593, email me at mike@clnonline.com, or Lynn directly at ljc@carlislecommunications.com.
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A.C. MOORE: OPERATING PROFIT UP 32%Sales for the year ended December 31 rose 18% to $262.1 million; same-store sales rose 3%. Operating profit before pre-opening expenses was $12.7 million, up 32%. Pre-opening costs were $1.9 million for the 10 new stores opened during the year. Net income was $6.6 million ($0.88/share) compared to $5.7 million ($0.76) in 1999.Operating profit for the quarter, before pre-opening expenses, was $11 million, up 22%. Sales rose 18% to $93.2 million, but same-store sales fell 0.5%. President/CEO Jack Parker said in 2000 the company increased its store count by 25% and implemented a new point-of-sale system. "We feel comfortable with the guidance we provided previously for the year 2001," Parker added. "We continue to project earnings/share for the year of $1.08 to $1.10 and that for the first quarter there will be a loss of $0.04 to $0.05. Already in the first quarter of this year, we have opened new stores in Cary, NC; Hyannis, MA; and Saratoga Springs, NY. These three new stores are in line with our plans to open 10 to 14 new stores during the course of the year." To hear a conference call in which A.C. Moore officials discuss the 2000 results and 2001 plans, go to vcall.com.
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THE AXE FALLS: FRANK'S IN CHAPTER 11How quickly the mighty can fall. Frank's Nursery & Crafts, once the most powerful craft chain in the industry, and its parent, FNC Holdings Inc., filed for Chapter 11 in the U.S. bankruptcy court in Baltimore on February 19th.Frank's also obtained a $100 million debtor-in-possession financing for a two-year period from a lending group led by Wells Fargo Retail Finance, LLC. Frank's will also close approximately 24 under-performing stores. Joseph Baczko, Chair/CEO of FNC Holdings, said, "During 2000, adverse weather patterns negatively impacted lawn and garden sales across most of our principal markets in the Midwest and Northeast. What turned out to be a difficult lawn and garden season for us this year was followed by poor comparative results in our Trim-A-Tree holiday sales, which was consistent with the general softness in sales at retailers during the Christmas period. "In addition," Baczko added, "our planned program of sales of 44 closed stores did not meet our expectations due, in large part, to market conditions late last year. We intend to continue to pursue these sales aggressively." Until the early-mid 90's, the once publicly held company devoted a substantial amount of its inventory to crafts. Frank's operates 218 specialty retail stores in 15 states, primarily in the Midwest and Northeast. In its fiscal year ending January 28, 2001, Frank's had sales of approximately $435 million with approximately 1,650 full-time and 4,250 part-time employees. In a letter to vendors, Baczko wrote, "The success of this reorganization and the retention of our vendor relationships are our top priorities. I know that the filing will cause hardships for many of you. Unfortunately, bankruptcy law prohibits Frank's from making payment now for goods and services received on or before the February 19, 2001 filing date. Any such payment must await approval of a plan of reorganization by the Bankruptcy Court. Again, I deeply regret the hardship this may cause."
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MICHAELS, JO-ANN'S REPORTS DUE SOONWe've seen the sales reports. But how about profits? The industry's two largest chains will be issuing their earnings reports soon. Michaels has already announced that profits were affected by consumers buying Christmas goods late in January, when the discounts were the largest. Jo-Ann's has the cost of its investment in IdeaForest, the company now operating JoAnn.com.Michaels will release its results this Wednesday and host a conference call at 4 pm. CST. To participate in the call, dial 973-628-9554. To listen over the Internet, go to vcall.com at least 15 minutes early to register, download, and install any necessary audio software. Replays will be archived until Thursday, March 15th at vcall.com or by phone at 420-220-0469. Jo-Ann's releases its annual and fourth-quarter results March 13. Officials will hold a conference call to discuss the results the same day at 10 am, EST. You can listen by going to joann.com or streetevents.com. For the JoAnn site, click on "About Jo-Ann," then "Investor Relations" under the heading, "Our Company," then click on the "Conference Call" icon. If you can't make the live broadcast, the call will be archived on both web sites.
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WAL-MART: A TOUGH YEAR, BUT STILL A RECORDFor the year ended January 31, net income increased 17.1% to a record $6.295 billion ($1.40/diluted share) compared to $5.377 billion ($1.20/diluted share) a year ago. Net sales rose 15.9% to $191.329 billion.For the fourth quarter, the Wal-Mart Stores segment, including Supercenters, saw operating profits rise only 1.5% to $2.765 billion, although sales rose 11.8% to $35.48 billion. Same-store sales rose 3%, a smaller-than-usual number for Wal-Mart. President/CEO Lee Scott said, "It was a good year but a year that was not quite up to our high Wal-Mart expectations. In a difficult economic environment, we will spend almost $9 billion in capital expenditures and add approximately 8% to our retail square footage." The International segment led by John Menzer, former president of the old Ben Franklin, had an operating profit of $1.112 billion, up 36.1%, for the year and up 8.9% for the quarter. As of January 31st, the store count is 1,736 Wal-Mart stores, plus 2,000+ Supercenters, SAM'S Clubs, Neighborhood Markets and stores around the world. The company now employs more than one million people.
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TRENDS IN WEB PAGE DESIGN(Note: This is the first edition of Creative Leisure News' new "trends" feature. In each issue we'll have an guest expert focus on a product category, or trends in advertising, retail, or business. This article on trends in web design was written by Lynn Carlisle of Carlisle Communications.)Ironically, one of the newest trends in global web design doesn't sound very trendy: Simplify your site. Simplify? But isn't everyone surfing faster now than ever? Doesn't everyone have the latest and greatest browsers? The answer is "yes". DSL (dedicated subscriber line), cable modems, and ISDN (Integrated Services Digital Network) lines are propelling suburban surfers faster than ever -- which is precisely why you need to simplify your site. As the speed with which folks can surf the net increases, their patience level decreases. If they have to wait for a charming-but-ambitious animation graphic to rotate, you can be sure they are already clicking away to faster, simpler sites. Good craft website designers should already be familiar with the "simplify" mantra. While a handful of crafters are "early adopters" of web technology, most of our online visitors still don't know their own connection speeds. Our customer associates plug-ins with air freshener and thinks a Java pop-up window will be offering her coffee. She doesn't like cookies (the byte, not the bite, kind) and is very concerned about her privacy and credit card security. Plus, she is often an AOL user, and many web goodies are not AOL-friendly. Our online crafter is delighted with community but confused by too much cross-linking. She wants inspiration; she doesn't want to get lost. She wants a lot going on, but she doesn't want to feel overwhelmed by your well-intended marketing. In short, to reach our online crafting audience, a simple site can accomplish more than a site that is more technically robust (read, more complicated). While we web consultants brainstorm exciting ways to make a site "sticky" (web-ese for drawing repeat visits), true stickiness may lie in creating a simple, easy-to-use site that is, well, comfortable, like a pair of old shoes. Like her favorite craft store, your site should be a place where she knows where to find everything and the door is always open. The trick is to make her feel at home and surprise her at the same time. Web-tech innovations, periodic redesign, and creative navigation are used effectively every day on craft sites. But before adding a new gee-whiz feature or another level of navigation to your site, try to evaluate each new tool's added value against its potential confusion factor. Sometimes simplicity is best. For your craft web site, it's always best. -- Lynn Carlisle, Carlisle Communications, Inc. (Comment: As we mentioned in our "Commentary," Lynn has offered to provide paid CLN subscribers with a one-page, confidential assessment of their sites -- free. Contact Lynn at ljc@carlislecommunications.com; 252-752-9426; fax: 252-752-9318.)
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RANDOM NOTES, RANDOM THOUGHTS1. Ever read something in Creative Leisure News and think of a non-subscribing friend who'd enjoy a particular issue or article? Now we've made it easier for you to pass the word. On our main page you'll see a box in the upper lefthand column. Simply type in your friend's email address, your own, and a very brief message. The software automatically sends your friend your note and a link to the CLN site. (Your friend will not be contacted again and we don't keep a copy of his/her address.)2. What a shame about Frank's. Actually, I gave up on them a few years ago after a phone conversation with the guy who was then the merchandising vp. There was a rumor floating through the industry then that Frank's would drop "Crafts" from their name. I told him if it's not true he should tell me. If vendors think Frank's is getting out of crafts, I explained, they won't show the Frank's buyers their new products or give Frank's the best deal. "Oh I don't care what the vendors think," he replied. At that point I gave up on Frank's as a viable player in the craft industry. 3. An old friend, Art Setterlund, has joined a Peoria, Illinois printing/media company, Multi-Ad Services. Art's the former Associate Publisher for Crafts, McCall's Needlework & Crafts, and PCM. Art's very knowledgeable about our marketplace. Multi-Ad offers imaging and print capabilities for publishers, plus design and layout services, copywriting, website and marketing content development, co-op revenue assistance, and more. Multi-Ad has a solid reputation in the area, but I never bothered to recommend the company until they had someone with experience in our industry. Contact Art at 800-348-6485, ext. 5126, or email asetterlund@multi-ad.com. 4. Lynn Carlisle's report on simple websites is right on the money. About a year ago, when e-commerce sites were deluging the industry, I did a simple test. I picked a particular color of Delta's Ceramcoat paint and surfed to as many sites as I could find to see how difficult it was to buy a bottle. The site that made it the easiest to get to that color of paint was not one of the big fancy sites, but paintinfools.com. Oh, by the way, PaintinFools is still doing fine, after many of the other sites have faded into cyber oblivion. A simple site may mean a less costly site, one that requires fewer sales to break even.
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A PRODUCT DEVELOPER'S VIEW OF THE HIA SHOWWe asked one of the industry's leading product developers for his opinion of the recent show. His answer was far longer than we usually print, but we thought it had a number of thought-provoking comments. (Note: he was not involved in any of the products mentioned below.)CONSOLIDATION. Retailers continue to consolidate vendors, making it difficult for the small manufacturer to break into the market. The result to the industry is a loss of innovation provided by these unknown manufacturers. PRODUCTS. Basics are the focus. I see major investments in good extensions and designs for proven lines. New, innovative product (meaning new material, chemistry, technology, applicator, or design area) was minimal. CREATIVITY. However, I do not think this necessarily means that development of innovative product is any less than historically experienced; it's just not exhibited as often at the show. Growing a category slowly is no longer a possibility. If you have a good concept, you will be copied and the large retail accounts will even ask other manufacturers to join the fray. This, despite the fact that if your new product does not immediately result in significant sales volume, it is pulled from large retailers. These two factors result in large-line introductions only (versus a small-line introduction with a growth plan), driving manufacturers to adopt an extreme philosophy of requiring pre-sell commitments prior to show exposure. If the developer of a large line can not get a minimum of 1,500 stores to commit before the show, then he doesn't show it at the show. Without this 1,500-store base, the show can only serve as a place for sales to independent retailers and for a large line, it is too expensive to manufacture for independent store distribution only. WORTH NOTING. Westwater's Spray Art -- fabric paint in a mini-spray can. A fun, fast, easy line that can be built upon. It's one of very few new-new products -- new paint formula in a new applicator. The only question is whether it will be supported so it can grow into a basic line, or will it be a flash in the pan. American Art Clay's Genesis line is a sleeper. It's in its 3rd year and people finally get it. It's a very revolutionary product to hit the "fine art" area and, with proper marketing, could be brought into the general craft area. And back to the future: Friendly Plastic is benefiting from the wire/jewelry uptrend. Good to see and well deserved. Provo should win a Merchant of the Year award. Usually offering a slight twist on proven basics, building a complete merchandising vision for shelf management; then add credibility and integrity of owner and you have one of fastest growing companies in the industry. NSI is a leader in tools over technique orientation to crafting. Dynamic, easy-use tools make crafting a no-risk, short-learning-curve process versus technique of skill required crafts. The company stays in hottest categories (wearable, wire, nails, etc.), crosses age ranges from kids to adult, and it's a winner. Delta appears to commit to a category and go for it. No over-built lines, but good innovation and nice tight merchandising which includes awareness, education, trial, and repeat. Add three more Delta's to the industry and we would always have consistent growth. Reynolds is one of few big manufacturers to enter the craft industry with their eyes open. Yes, Reynolds does mean "materials" to the consumer, and that is what they have introduced. Hopefully, they will either team with a device maker or also create devices on their own. To make money on materials you have a choice: create a hot use (technique) that is easy to communicate, or a device that requires easy repetition and lots of material to create the end result. Maybe they should talk to NSI. SCRAPBOOKING. The customer base is keeping the small manufacturers and small retailers in the best position they have seen for a while. It's hard to create proprietary items that can not be knocked off by someone willing to take short margins; that problem will keep the big players out of the category. There will be a move to smaller examples of memory projects -- you can only make so many scrapbooks. Watch for frames, cards, wearables, etc. WEARABLES. It's a slow build. Even with all the baggage from the mid 1980's, it's rising from the ashes. In reality, it is the perfect craft area -- low cost, low skill, high perceived value, emotionally rewarding, good gift giving, broad age range, disposable, multi-skill level. There will be more to come. STITCHERY. Give a hand to family businesses -- Needle Magic and Janlynn are sticking to it. There's some innovation and broadening lines, but lots of good old basics. Biggest twist is projects that are actually functional; I guess vendors realized grandma can only fit so many unframed cross-stitch squares in a hope chest and the generation X mom has enough stuff on her walls, but enjoys sending a needlepoint card or stitching a switch plate. EDUCATION. The most under-committed area in the industry. It can not be just books anymore. Merchandising must bring awareness, education, and product to consumer at same moment of contact. CONSUMERS. High Tech: still not quite ready to bloom ... Kids: Maybe someday retailers will realize kids crafts are driven by the moms that buy them. Kids do not shop retail craft stores. Mom buys for the occasion, not for the craft, per se. So if the industry is ever to see kids crafts be significant, it will be because of merchandising based on mom buying by the occasion and the behavior, not by product innovation ... Teens: Another doesn't-shop-in-craft-store issue. Focus on a teen design section within a category. SUMMARY. With almost no barriers to enter a category, an industry size of over $6 billion (depends on whose numbers you read), less than a handful of companies over $100 million in sales, low investment for development, constant consumer appetite and willingness to participate in multiple crafts simultaneously --- shame on anyone who is not optimistic!
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MISCELLANEOUS NEWSACQUISITION. DMD Industries acquired MPR Associates. MPR remains in High Point, NC and will be a separate division of DMD. MPR President John Melton remains with the company in an advisory capacity. All shipping and customer service remain the same.FEBRUARY. Hancock's sales rose 5% for the month ending Feb. 25. SCRAPBOOKING. Other chains are finally waking up to the consumer's interest in memory. Discount Store News reports a new Super Target in Orlando has a 12-foot section, as does the OfficeMax store in Anaheim. Hallmark is in the act, of course, and even Bed, Bath & Beyond stores carry a small selection. ACQUISITION. Primedia purchased Creating Keepsakes magazine. According to a press release, the Creating Keepsakes' staff will remain in Bluffdale, Utah. Primedia is the New York-based conglomerate that publishes Crafts, Craftrends, and numerous other publications. TV. HIA National Craft Month spokesperson Carol Scheffler will appear on Wednesday's episode of The Rosie O'Donnell Show and award Rosie with a Certified Professional Demonstrator diploma. ACCI. The officers for the Board of Directors include Chair Ron LaRosa, Delta ... 1st Vice Chair Lynda Musante, Reynolds ... 2nd Vice Chair Tony LaSpada, Bemiss-Jason ... Treasurer Steve Graham, Toner Plastics ... Secretary Bob Ferguson, Ferguson Merchandising ... Past Chair Mike McCooey, Plaid. PROJECTS. HIA is selling a packet of 23 project sheets collected from its exhibitor sponsored workshop series at the HIA 2001 show. The cost is $15 for members, $20 for non-members. Call Laura Perez at 201-794-1133 or email lperez@hobby.org. MEDIA. Excellent article, "The Healing Power of Crafts", in the March 13th edition of Woman's Day. The author quotes a number of women who have been helped, physically and emotionally, by crafting. PROTOTYPE. Rag Shops is planning a new, larger prototype store, Discount Store News reported, to be unveiled in the latter half of 2001. TV. QVC's next all craft day is tomorrow, March 6th. STOCK. In the March issue, Money magazine quotes the manager of FPA Capital Fund as saying: "You rarely find a retail concept with little competition. Michaels is the only national retailer of arts and crafts supplies in the US. The concept has great demographics, and the market is not overly saturated. With more than 600 stores today, Michaels could have 1,000 outlets in four years. Their sister chain of art-framing stores, Aaron Bros., is also growing rapidly. As the company achieves greater economies of scale there's no reason that they can't get to double digit operating margins. It's now trading at about $35, and we think that in 3 to 5 years Michaels could be a $100 stock". CRAYONS. Binney & Smith's revenue grew 4% last year, according to a report from its corporate parent, Hallmark. SHOWS. 1,400+ painters, and increase of 22%, are already registered for the Society of Decorative Painters show in Reno May 14-20. Call 316-269-9300 ... Sponsors of the National Stationery Show May 20-23 in New York expect 18,000 buyers and 1,400 exhibitors. For details, go to nationalstationeryshow.com or call 800-842-0028. A section will include 325 vendors of scrapbooking, stamping, and craft supplies. STOCK. Wedbush Morgan reiterated coverage of Michaels at Buy. RATINGS. Standard & Poor's lowered its rating on Ames' senior unsecured debt to single-'B'-minus from single-'B'.
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INTERNET & E-COMMERCE NEWSBANKRUPTCY. eToys is filing for bankruptcy and will shut down next week.E-COMMERCE. CraftClick.com sold substantially all of its assets to a group of California entrepreneurs in exchange for the forgiveness of outstanding secured loans made by them to CraftClick totaling $550,000, plus accrued interest of $9,625 and a payment of $77,275 to substantially redeem CraftClick's obligations. (Note: We were confused by the press release, so we emailed the company for clarification, but did not receive an answer by our deadline.) DATA. A recent HIA survey at its consumer site ( I-craft.com) reported that 96% of the 276 respondents said they sometimes or always buy more than they'd planned to buy when visiting an industry store -- strong evidence of the importance of impulse items and in-store merchandising. NEW. Staedtler's new web site is at staedtler-USA.com. The new site provides descriptions and color photos of its products. LAYOFFS. Walmart.com will lay off 24 workers (10% of its workforce) and stop selling low-priced apparel and cosmetics because shipping costs make them illogical to buy online, the New York Times reported. CEO Jeanne Jackson told the Times, "We're being very careful not to spend in this environment on categories and ideas that aren't working."
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THE CREATIVE NETWORK: JOB OPENINGSThe only personnel recruitment firm specializing in our industry has numerous job openings. Click on "Jobs" in the lefthand column for the latest openings and the featured job of the month. Call 360-834-0802; fax 360-834-0702; email jessica@creativenetworkinc.com; or check www.creativenetworkinc.com.
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THE CLN RETAIL INDEXA. C. Moore (ACMR). Last*: 8.31 ... Change**: -0.38Ames (AMES). Last*: 4.09 ... Change**: +0.09 Hancock Fabrics (HKF). Last*: 6.80 ... Change**: +1.70 Jo-Ann Stores (JAS.A) [a]. Last*: 5.50 ... Change**: -0.05 Michaels (MIKE). Last*: 32.88 ... Change**: +1.07 Rag Shops (RAGS). Last*: 2.56 ... Change**: -0.06 Wal-Mart (WMT). Last*: 48.92 ... Change**: -3.44 CLN Retail Index. Last*: 109.06 ... Change**: -0.1% Dow Jones Index. Last*: 10,466.310 ... Change**: -3.1% *March 2 ** from February 16 [a] voting share Note: Prices are exclusive of dividends
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OBITUARYIt is with the saddest heart that Scott Phelps of Promotions Unlimited passed this along:Please join me in remembering a great icon -- the veteran Pillsbury spokesman. The Pillsbury Doughboy died yesterday of a yeast infection and complications from repeated pokes in the belly. He was 71. Doughboy was buried in a lightly greased coffin. Dozens of celebrities paid their respects, including Mrs. Butterworth, Hungry Jack, Betty Crocker, the Hostess Twinkies, Captain Crunch, and the editor of Good Housekeeping. The grave site was piled high with flours. Aunt Jemima delivered the eulogy, describing Doughboy as a man who never knew how much he was kneaded. Doughboy rose quickly in show business, but his later life was filled with turnovers. He was not considered a very smart cookie, wasting much of his dough on half-baked schemes. Doughboy is survived by his wife, Play Dough; two children, John Dough and Jane Dough -- who incidentally, has a bun in the oven. He is also survived by his elderly father, Pop Tart. The funeral was held at 3:50 for about 20 minutes.
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REMINDERS1. If you want a hard-copy of this issue, and click on "Printer Friendly version". 2. If your company is a paid subscriber, everyone in the main office is welcome to register, free. 3. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page. 4. Creative Leisure News is published on the first and third Mondays of each month. Your next issue will be Monday, March 19th. Have any rumors you need checked? Company news or comments on industry issues? Call Mike Hartnett, in confidence, at 309-925-5593; fax 309-925-9068; or email mike@clnonline.com. xxx
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