 |
                 |
Creative Leisure News
2677 Ashley Ct.
Tremont, IL 61568
Phone: 309-925-5593
Fax: 309-925-9068
Email: mike@clnonline.com
|
|
|
|
|
Date:
March 19, 2001 TABLE OF CONTENTSCOMMENTARY: VENDORS COMPLAINTSTwo events kept my phone ringing off the hook this past week -- Jo-Ann's financial report (see below), and my column in the March issue of CNA magazine. If you haven't read it, I warned that some common industry practices are stifling the industry's creativity.Two comments in the column unleashed a torrent of reaction from vendors: a) major buyers' unwillingness to try new products; and b) buyers taking vendor A's product and having it copied overseas or giving it to vendor B to copy. The callers' stories were astonishing, depressing, and ultimately harmful to the long-term future of the industry. (And since Wall Street is destroying our 401K's, meaning we're all going to be working longer than we expected, maybe we ought to pay more attention to the industry's long-term future.) I'll be writing much more about this in future issues, but for now, here are some comments from Ed Rigsbee in his book, PartnerShift: How To Profit from the Partnering Trend. Rigsbee quotes from other industries, but the comments sure sound like my phone calls. 1. Fear of commitment. "Customers are not willing to single source, but still want our total bundle of value-added resources at no additional cost." 2. Operations-level support. "We get commitment from top management, but the program gets derailed at the operations level." 3. Communication breakdown. "Everyone is so busy we only communicate when there is a need for fire fighting . . . hence the relationship takes on a negative tone over time." Check "Random Notes, Random Thoughts" below for more on this.
[ top ]
JO-ANN'S GLOOMY REPORTTHE YEAR. Net sales increased 7.4% to $101.8 million. Same-store sales rose 1.3% ... There were one-time charges and equity losses totaling $24.9 million after taxes, or $1.38/share ... Including the charges, there was a net loss of $13.6 million ($0.75/diluted share), compared to a net income of $25.6 million ($1.38/diluted share) a year ago. Excluding one-time charges and equity losses, net income would have been $11.3 million ($0.63).THE 4TH QUARTER. Net sales rose 8.8% to $496.4 million. Same-store sales rose 0.2% ... There was a one-time, pretax charge of $6.7 million for costs associated with 42 traditional stores to be closed this year, and a $23 million charge associated with the estimated writedown, below cost, of approximately $60 million of inventory to be discontinued. Excluding the charges, operating income was $29.1 million for the quarter, down from $40 million. IDEAFOREST. The company wrote off the balance of its investment in IdeaForest/Joann.com in the fourth quarter -- a $3.3 million charge. Jo-Ann's said IdeaForest's internal projections anticipate profitabilty in its third year, but will need additional cash investments to operate through 2002. "Although the company remains committed to an online presence," the press release said, "the level of any future cash investment by Jo-Ann Stores and the other investors in IdeaForest is uncertain. As a result, the company concluded the carrying value of its initial investment should be reduced to zero." EXPLANATION. "Unfortunately, out-of-stocks stemming from our enterprise-wide systems installation were further exacerbated by a weak economic environment in the second half of the year," said Chair/CEO Alan Rosskamm. ACTION. Rosskamm ordered a freeze on new store openings until the internal systems and cash flow improve, and debt is reduced ... Eliminate non-productive inventory ... Close non-contributing stores. 2001. "Our projections indicate negative operating performance trends, relative to last year, in each of the first three quarters of this year," Rosskamm said, "and a breakeven net income performance for the full fiscal year. We expect to produce an improved operating performance for the fourth quarter, but more importantly, to put ourselves in a position by year end to deliver sustained operating performance improvement in fiscal 2003." The company expects a net loss of $3-4 million in the first quarter this year. CHANGES. "In April, we start the transition to replenish over 300 of our stores from our recently completed distribution center located in Visalia, California," Rosskamm said. "This transition should be completed by July, and then we will begin to transition out of our contract warehouse facility in Southern California. Also in April, we will migrate our DC replenishment methods from a manual process to an automated forecasting system. In the third quarter, we expect to migrate to improved, forecast based, replenishment methods for our stores." STOCK. The stock dropped 27 cents by closing on the day of the announcement, but most stocks dropped that day. However, it continued to drop and finished the week at $3.90, down 29% in the past two weeks and setting a new 52-week low. INVENTORY. Overstocked in some products, out of stock in others. "We will continue to be challenged in fiscal year 2002," Rosskamm predicted, "as we complete the major supply chain initiatives we have invested so heavily in over the last two and a half years." STORE COUNT. Last year Jo-Ann's opened 16 Jo-Ann etc stores and two traditional stores, relocated six traditional stores, and closed 37 underperforming traditional stores. The company also accrued for 42 additional stores that were identified for closure in fiscal year 2002.
[ top ]
REACTION TO THE JO-ANN NEWS1. "Not surprised with the Jo-Ann's results. It must be extremely difficult to operate a store group, which has two completely different formats and assortments, under the same brand name. Despite their committment to change, they still have a softlines focus even in the ETC stores."I believe their decision to hold any new store growth until they get their infrastructure and systems in place is very smart and timely. This will also give their merchant teams time to refocus." -- Major Vendor 2. "I was not surprised to get your news about Jo-Ann Stores. Since I retired, I've had the opportunity to visit Michaels, Ben Franklin and Jo-Ann Stores in both Northeast Pennsylvania and Gainesville, Florida. The cleanliness in Jo-Ann Stores leaves much to be desired. They have a dingy look and the floors are never swept. I'm not targeting one specific store. In comparison to Ben Franklin, Crafts & More, and the Michaels stores that I've been to, Jo-Ann stores are a literal turn-off. I'm sure I can't be the only one that feels this way." -- Former Vendor 3. "Jo-Ann's is trying to cancel purchase orders, that people have been working on for months, days before the ship date! Oh, my! Nothing is easy!" -- Major Vendor 4. "Jo-Ann's system is getting better. I'm now getting sales reports that just weren't available three months ago." -- Manufacturer's Rep
[ top ]
SALES FIGURES FOR FEBRUARY(Note: All sales figures are for same-store sales, not overall sales, for February.)Bad weather and a slowing economy were the culprits for a very lackluster month. Hancock was the big winner, with sales rising 5% ... Michaels sales rose 1% for the month, led by sales of ribbon, basic crafts, and seasonal items ... Jo-Ann's sales declined 6.8%, but officials reported gross margin rates were higher than a year ago. Ames' sales fell 5.3%. Chair/CEO Joseph Ettore said February sales were on plan before a major storm hurt sales by $11 million ... Wal-Mart stores sales rose 4.0% ... Hancock's sales rose 5% ... Target was up 1.5% ... Kmart rose +3.3% ... Pamida's sales are finally reported separately from the parent ShopKo's overall sales -- and dropped 7.6% for the month.
[ top ]
MICHAELS BOOSTS NET INCOME BY 29%For fiscal 2000, Michaels' net income rose 29%, to $80.4 million, on sales of $2.249 billion. Sales were up 19% and same-store sales rose 5%.The report for the fourth quarter revealed net income rising 7.5% to $50.1 million. Sales jumped 21% to 815.5 million and same-store sales rose 4%. The current store count is 635 Michaels stores, 120 Aaron Brothers stores, and 1 wholesale operation.
[ top ]
MICHAELS EXECS DISCUSS THE FUTUREHighlights of the Michaels execs' conference call with analysts, held immediately after the fourth quarter and annual sales-profit reports were released:Executive VP/CFO Brian DeCordova. Inventory/store will remain the same through the first half of the year and increase slightly in the second half ... Stores opened in fiscal 2000 should have first full-year sales of $3.2 million ... Michaels' utility bills rose dramatically late last year. "While we did budget for an increase in this account for the current year, early results would suggest our occupancy budget could still be at risk by as much as $500,000 per month." ... Same-store sales are expected to rise 2-4% in the first two quarters, 4-6% in the second half. ... Gross margins should remain flat, with higher utility costs offsetting increases. President John Martin. Store traffic dropped in February, as expected. Add the drop in the consumer confidence index and the conclusion is "the current challenging retail environment will continue well into the second quarter." ... Michaels plans to open 14 new and relocate 4 Michaels Stores, and to open five new Aaron Brothers stores ... Look to reset the framing, kids, wood, and needlework departments, with fewer SKU's in wood and more in needlework, especially yarn and yarn accessories. CEO Michael Rouleau. Aggressively pursuing implementation of Michaels.com; e-commerce sales remain small, but traffic to the informational portions of the site is strong ... Despite the economic slowdown, "We are not backing off our commitment to implement the initiatives we need to get us to the $5 million store, even if it causes us some pain along the way."
[ top ]
ZANY BRAINY IN TROUBLEThe kids' edutainment chain said it's in default under its $115 million credit facility, according to a form filed with the Securities and Exchange Commission, Dow Jones News reported. The company said the lender is allowing it to continue borrowing, but might discontinue it at any time.ZB also said it doesn't have enough money to finance its operation for the next year under current conditions, and must replace or restructure its existing debt, have vendors restructure ZB's payments to them, or obtain additional capital. The company is negotiating for a short-term loan to supplement its $115 million credit facility, negotiating to replace that current facility, and planning to meet with its largest vendors to discuss restructuring the company's unsecured debt. ZB has also hired advisors to explore "strategic alternatives" which include a sale of the company, merger, etc. Meanwhile ZB's stock was warned by NASDAQ of possible de-listing because it failed to maintain a minimum price of $1 over a month's period. It has until April 30 to reach $1. The stock finished the week at $0.25/share.
[ top ]
RANDOM NOTES, RANDOM THOUGHTS1. During the copyright seminar at the HIA show, I asked panelist Dana Kaplan, a lawyer with the New York firm Kenyon & Kenyon, if a buyer was liable for taking vendor A's copyrighted or trademarked product and giving it to vendor B to copy.Absolutely the buyer is liable, she said. In effect, it's the copyright equivalent of contributing to the delinquency of a minor. Vendor B is liable, of course, for copying, but the buyer -- and his/her employer -- is liable, too. After the seminar, a large vendor said to me, "Thank you for asking that question. That's what every vendor wanted to know." 2. A small, relatively new manufacturer called in response to my stifling-creativity column. He won the award for the best new product at the HIA show a couple years ago. QVC has been selling his same items for years and given him awards. His line fits nicely into the current paper trend. He has very strong sales among independents. Yet, after three years of trying to sell the chains, he's only recently been able to get a test in one chain. Can't get in the door with the others. Of course, chain buyers are bombarded with people like this -- all claiming their products are the greatest. But there are too many vendors, with too many seemingly excellent products, who can't even get an appointment. By the way, I hear the same complaints from established vendors as I do from newcomers. 3. Our major chains are not stupid. Many of their practices are dictated by the size of their companies and the pressure from stockholders. Still, our system needs fixing. Any suggestions? Email me or call me at 309-925-5593.
[ top ]
TRENDS AFFECTING MANAGERSAs part of CLN's new series on trends affecting your business, Gail Czech of The Creative Network describes major challenges for modern managers and their employees.1. Greater Employee Initiative. Employees are increasingly required to be self-directing, autonomous, and responsible for their work-- while also acting in the employer's best interest. 2. The Manager's Changing Role. Coercive and authoritarian approaches are less effective than ever. Today's manager must increasingly function as coach, colleague, counselor and cheerleader. Managers need to create a supportive work environment, using a more humanistic approach. 3. The Impact of Technology. Computers and technology can promote worker alienation. As Megatrends' author, John Naisbitt, predicted, the more "high-tech" we become, the more "high-touch" we need to be, including more direct communication in the workplace. 4. The Pace of Business. It's ever increasing, minimizing employee-manager contact. Many managers are so focused on their own work and what's urgent to their bosses, they spend less time with their employees. They may claim people are their most important asset, but unless this shows in daily interactions that are positive and meaningful, employees won't feel valued. Respect and recognition count; the lack of them undermines employee performance. 5. Re-building Trust after Layoffs. Coupled with the ongoing flux in almost every workplace, employees need perspective, involvement, and grounding more than ever -- and they need it most from their managers. 6. Employees & Meaningful Work. Workers want more balance between their jobs and family life. The next generation of employees will increasingly demand work environments they find more meaningful. Fewer workers will be available in the wake of the baby boom, and they may have fewer skills, which compounds management's challenge to motivate them. (Of course, they may possess skills and perspectives which are more useful for the changing times.) 7. Low Cost Motivation. In tight economic times, non-monetary rewards, recognition, and praise can be effective employee motivators. In fact, most studies on the topic show these rewards are more important to employees than money. They contribute to an amenable work environment, and can make the difference between success and failure. It is largely a matter of attitude, and that is something within the control of each of us.
[ top ]
MISCELLANEOUS NEWSCONDOLENCES. Our very best wishes to Ginnie Thompson, the founder of the modern cross-stitch movement in the U.S., following the death of her husband, Ken. There will be a memorial service at Pawley's Island at a later date.JOB. Major publisher needs an editor for a consumer craft magazine. Call Mike Hartnett, in confidence, at 309-925-5593, or email mike@clnonline.com. PEOPLE. Ed LaFley is the General Manager of Yaley. Ed is the former National Sales Manager of Enviromental Technologies. CHARITY. To commemorate its 25th anniversary, Plaid will host an online charity auction on eBay to benefit the American Cancer Society, in conjunction with the Society of Decorative Painters show. Original hand-painted and signed pieces (Priscilla Hauser, Ken Brown, Donna Dewberry, etc.); a collector's edition of Plaid's new 25-year retrospective book, A Celebration of Decorative Painting; and a selection of Plaid painting products will be available for bidding May 12th - 21st at ebay.com. SDP show attendees can bid on the items at the Plaid booth, while home bidders can go to http://pages.ebay.com/catindex/hobbies.html. NEW STORES. Ames will open stores in Chicago and Villa Park, Illinois; Gary, Indiana; Columbus, Ohio; and North Brunswick, New Jersey on March 29 ... Michaels is opening a store on Long Island, where the now-defunct Creativity store once was. RATING. Adams Harkness initiated coverage of A.C. Moore at Buy. DIVIDEND. The Hancock board increased the stockholders' quarterly cash dividend by 60% to 4 cents/share. CEO Larry Kirk said strong cash flow allowed the company to reduce its debt by $15 million, repurchase $5.5 million worth of stock, and spend $4 million upgrading stores -- thus paving the way for the increase. LOOKING. Pro with industry experience in sales, marketing, finance, and operations is looking and can relocate ... Sales veteran, with 10 years experience selling to major retailers, is looking but cannot relocate from the Southeast. Call Mike Hartnett at 309-925-5593 or email Mike in complete confidence for details. WASHINGTON. Congress passed legislation, and President Bush promised to sign it, repealing the ergonomic rules enacted in the final months of the Clinton administration. OSHA said the rules would prevent 4.6 million musculoskeletal disorders in the next decade. Business lobbies said the rules were too costly ... Congress passed new bankruptcy laws, too, making it tougher for consumers to declare bankruptcy, but left the laws regarding businesses alone. BIRTHDAY. Best wishes to Wayne Kamitaki, whose family started a Ben Franklin store 50 years ago. Now there are 9 stores in Hawaii and one in Japan ... Congrats to Duckwall-ALCO, now celebrating its 100th Anniversary. It began when Alva Lease Duckwall, Sr. borrowed $413 and started a variety store in Abilene, Kansas. The company now operates 265 stores in the Midwest and employs about 5,000 people. PAINTING. North Light Books is promoting a national Paint on Rocks day for crafters and painters on May 19 in honor of Lin Wellford and her Paint on Rock book series. North Light is offering:a start-up kit with quantities of books; a mobile for display; a videotape, Paint Animals on Rocks with Lin Wellford; free shipping; and deep discounts. Participating stores are listed on the website, decorativeartist.com/rockday.html, and one store wins Lin Wellford appearing at the store doing demos that day. Call David Oeters at 800-289-0963, ext. 261, or email Dave. MEDIA. HIA's National Craft Month spokesperson Carol Scheffler appeared twice on the Rosie O'Donnell Show, and conducted satellite interviews with tv stations around the country. NEEDLEWORK. TNNA has taken ownership of the Phoenix Needlecraft Market show August 26-27. I's other satellite show, in Philadelphia, is April 1-2, and the summer trade show is June 9-11 in Columbus, Ohio. Call 740-455-6773; email tnna.info@offinger.com, or surf to www.tnna.org. CATALOG. The industry's most unusual -- and hilarious -- catalog is by Cheap Wood Furniture (800-533-2527 or CheapWood@aol.com). The company sells all-wood store fixtures and has an online version at cheapwood.com. SHOWS. The PCM Group, sponsors of the Sew, Quilt, Craft Expo consumer show, moved to 5655 Riggins Ct., #10, Reno, NV 89502-6554. Call 800-472-6476. YARN. A study published by the National Academy of Sciences reported on activities that seem to prevent or delay the onset of Alzheimer's. Watching tv does not; knitting does.
[ top ]
INTERNET & E-COMMERCE NEWSMEDIA. The March 19 edition of Business Week includes a feature story on e-commerce successes by small companies. The key? Keeping expenses down. It highlights Florist.com, which made a $1 million profit on sales of $3 million last year, and Scrappin' Happy (scrappinhappy.com). The article describes how founder Carrie Hardy advertises successfully -- at no cost -- via email newsletters and posting messages on scrapbook newsgroups.TV. The first Craftopia show on the Home Shopping Network is March 30 at 7 and 11 am, and 4 and 9 pm EST.
[ top ]
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.
[ top ]
THE CLN RETAIL INDEXA. C. Moore (ACMR). Last*: 9.00 ... Change**: +0.69Ames (AMES). Last*: 3.81 ... Change**: -0.28 Hancock Fabrics (HKF). Last*: 6.80 ... Change**: UNC Jo-Ann Stores (JAS.A) [a]. Last*: 3.90 ... Change**: -1.60 Michaels (MIKE). Last*: 28.81 ... Change**: -4.07 Rag Shops (RAGS). Last*: 2.28 ... Change**: -0.28 Wal-Mart (WMT). Last*: 46.93 ... Change**: -1.99 CLN Retail Index. Last*: 100.501 ... Change**: -6.9% Dow Jones Index. Last*: 9823.41 ... Change**: -6.1% *Mar. 16 ** from Mar. 2 [a] voting share Note: Prices are exclusive of dividends
[ top ]
HEY! PAY ATTENTION OUT THERE!Folks, please read CLN more carefully! A while back I received an email from Scott Phelps of Promotions Unlimited. It was a cute play on words about the death of the Pillsbury Dough Boy.Thinking it would put a smile on your face, I ran it at the end of my last issue. Apparently some people read the headline, ("OBITUARY"), saw Scott's name, and thought he died! Yes, rumors spread that Scott had passed away. I'm happy to report Scott is alive and well. This isn't the first time this has happened. When I reported about the devastating fire at Walnut Hill's facility, the folks at Walnut Hollow received sympathetic phone calls.
[ top ]
REMINDERS1. Paid subscribers are invited to have their website evaluated by Lynn Carlisle of Carlisle Communications. She'll check the site and provide a confidential assessment and suggestions for improvement --free. Email your request to mike@clnonline.com or ljc@carlislecommunications.com.2. If you want a hard-copy of this issue, click on "Printer Friendly version". 3. If your company is a paid subscriber, everyone in the main office is welcome to register, free. 4. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page. 5. Creative Leisure News is published on the first and third Mondays of each month. Your next issue will be Monday, April 2nd.
[ top ]
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
[ top ]
|
|
|
|
|
|
|
Printer
Version
|
|
