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Creative Leisure News
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Date:
April 16, 2001 TABLE OF CONTENTSCOMMENTARY: ROSIE O'DONNELLSome craft organization should give Rosie O'Donnell an award for the way she promotes crafts.She has a Craft Corner feature on her talk show and the show's website has an extensive array of craft projects at //rosieo.warnerbros.com/pages/rosieo/crafts/index.jsp. Now the first edition of her magazine, Rosie, includes this note from her: "We want to make you laugh, make you cry, make you think, and maybe, just maybe, make you crafty." The issue also includes how-to projects and an extensive feature on her craft room in her home (with photos showing brand name craft products on its shelves). And there are more crafts at the magazine's site: http//rosieo.warnerbros.com/pages/link/external.jsp? url=http%3a%2f%2fwww.rosiemagazine.com. Basically, the magazine is similar to Martha Stewart's, except it's far more realistic and geared to real people, particularly mothers of young kids.
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MARCH SALES: MIXED RESULTSPoor weather and a slowing economy were blamed by some retailers for poor sales in March. Other retailers thought the weather and economy were fine.Michaels had a strong month, with same-store sales rising 5% and overall sales increasing 15% to $207.3 million. Jo-Ann's sales news was good: same-store sales rose 2.5% and overall sales rose 5.3% to $135 million. Hancock's same-store sales dipped 1.6% but are up 1.3% for the quarter-to-date. CEO Larry Kirk attributed the drop to reduced advertising efforts (no tv or newspaper ads). Wal-Mart's same-store sales rose 3.5%, but CBS Market Watch noticed that, buried in the sales announcement, was a warning that the company expected to miss its first-quarter earnings expectations of 32 cents/share, blaming cooler weather the past few weeks. Ames' sales plummeted 13.4%. Chair/CEO Joseph Ettore said, "March sales were negatively affected by poor weather. It is a fact we have long known that our core customer shops by the weather and not by the calendar. Spring did not come this March." Ettore estimates that snowstorms hurt sales by $24.5 million. He was encouraged by better sales the last week of March and early April, and improving gross margins. Others: Target, +3.4% ... Kmart, +1.0% ... Sears, -5.3% ... Duckwall-ALCO, -2.0% ... the Pamida division of ShopKo, -7.6%.
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A.C. MOORE SALES UP 26%A.C. Moore does not report monthly sales figures, but did say its same-store sales for the first quarter ended March 31 rose 4%, better than the company had expected. Overall sales rose 26% to $66.4 million.President/CEO Jack Parker stated, "We are very pleased that we beat our sales projections for the first quarter 2001, especially in light of having one less business day and the challenge of the weather this winter. With this sales performance, we are well positioned to meet or exceed the first quarter earnings guidance we provided in February." During the quarter the company relocated its Wilmington, DE store and opened stores in Cary, NC; Hyannis, MA; and Saratoga Springs, NY. The company opened its 54th store, in Raleigh, NC, earlier this month. First quarter earnings will be released this Thursday and officials will host a conference call at 11 am EST. You can listen to the conference call live over the Internet through Vcall at vcall.com.
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DUNCAN BUYS SOME BACK STREET LINESDuncan has acquired several major product lines from Back Street -- Chunky Stamps, the Funky Chunky Stamp program targeting tweens, Fabric Stamps, Fun Sponges, and Anita's Fragile Crackle."The stamping category has experienced rapid growth and success," said Mark Peters, Duncan's Senior Exec. VP of Sales/Marketing, "giving us a clear indication of the category's potential. We expect to grow the category even further with fresh designs and applications." Effective mid-April, all operations of the programs acquired will move to Duncan's Fresno facility, while key manufacturing will continue at existing overseas locations. Meanwhile, Back Street continues operations with its lines of acrylic paint, rubber stamps, and other items. "Rumors of our demise have been greatly exaggerated," said President John McDonald.
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RAG SHOPS RELEASES QUARTERLY RESULTS(Note: The company's sales/earnings figures for the second quarter and first six months are skewed somewhat by a change in accounting practices. The sales for the week after Thanksgiving fell into the first quarter of the current year, compared to the second quarter last year.)Sales for the second quarter and first half ended March 3rd were $25.8 million and $55.8 million, respectively, compared to $26.5 million and $54.7 million the prior year. Same-store sales decreased 3.1% and increased 3.0% for the second quarter and first half, respectively. If there had been no shift in the accounting calendar, same-store sales would have been +3.6% for the second quarter and +2.3% for the first half. Net income for the second quarter was $44,000 ($.01/diluted share) compared to $518,000 ($.11/diluted share) a year ago. Officials blamed the decrease on the shift in the accounting calendar, new store-opening expenses, and the operation of a secondary distribution center for an additional two months this year. Income before the cumulative effect of change in accounting principle for the first half was $1,326,000 ($.28) versus $1,498,000 ($.31) a year ago. During the quarter, Rag Shops opened two new stores and closed three stores, leaving the current store count at 65. In the second half of its fiscal year, the company plans to open two new stores and close one existing store.
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MICHAELS ADJUSTS 2000 SALES DATAMichaels restated its 2000 fourth-quarter and full year results, due to an accounting change concerning its method of accounting for custom frame sales in accordance with a new SEC accounting regulation "Revenue Recognition in Financial Statements."1st quarter: earnings of $8.23 million on sales of $474.2 million instead of earnings of $9.68 million on sales of $472.5 million ... 2nd quarter: earnings of $4.55 million on sales of $434.1 million, instead of $5.68 million on sales of $438.4 million ... 3rd quarter: $15.7 million on sales of $525.7 million, instead of $16 million, on sales of $526.5 million ... 4th quarter: earnings of $50.1 million on sales of $815.5 million, instead of earnings of $48.4 million on sales of $809.4 million.
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A NEW DISTRIBUTOR -- OR DESIGNER REP?Designs With TLC is a new distribution company, but not in the traditional sense. It was created to provide large retailers (independents or chains) with leaflets, books, and other items from needlework designers and publishers. In fact, President Terry Lee prefers to call herself a "Designer Representative".Designs With TLC presents a buyer a wide variety of leaflets and other products from designers. The retailer chooses the designs, amount, etc., and places the order. Designs then orders the products from the designers, assembles the order for the store(s), and ships them. The company currently carries needlework leaflets, books, chartpacks and some accessories, such as the Threadheaven Thread Conditioner. Designs is planning to expand to include knitting and crochet, charted needlepoint, plastic canvas, filet crochet, tatting, etc. A designer herself, Lee started the company because she felt buyers at many large stores are unaware of the wide variety of designers, many of whom have difficulty getting a foothold with larger retailers on their own. Lee does not see this as a conflict with needlework shops. Big retailers have space for more books and leaflets, many areas don't have shops, and those that do can benefit from selling supplies for a book purchased at the large store that may not carry all of the necessary materials. Lee credits Barbara Young, the needlework buyer for Hobby Lobby, for giving her the advice and input to get started. Designers, chains, buying groups, or large retailers who want more info, call Terry Lee at 253-858-2278; email dwtlc@worldnet.att.net; or fax 253-853-7510.
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SOLUTIONS TO THE CREATIVITY PROBLEMIn recent issues I've written about industry practices that discourage creativity and the development of the next cross stitch, fabric painting, or scrapbooking. In our last issue I asked for suggestions to fight the problem; here's a compilation of the suggestions:1. Vendors ripping off other vendors: Buyers should remember if a vendor will cut corners by copying someone else's work, he'll probably cut corners in other ways, too, such as quality control, haphazard shipping practices, etc. Cheaper is not always the best deal. 2. Buyers encouraging copying: If you don't think the original vendor is big enough to support your store(s) properly, have him license the item to a vendor with more resources. 3. Buyers' inadequate testing: If you must test, follow up with the managers in the test stores to see the line is displayed properly and the clerks are informed. Then give the new line enough time. 4. Opportunities: There should be a time each month when ANY vendor not currently doing business with the company can present a new line to the appropriate buyers. 5. Regionalize: If a vendor has a great new product, don't reject it out of hand because he or she might have trouble supplying tens or hundreds of stores. If the vendor can only supply 50 stores, be happy with that and expand when the vendor is ready. 6. Speed: Don't make buyers wait 6 months to re-set their department and add new lines. 7. Price squeezing: Each time a buyer demands an extra discount, ad allowance, buy-back, etc., or rejects a modest price increase, it decreases the chances the vendor will have enough money to develop the next hot new product. 8. Vendors copying vendors: "He stole a lot" is quite a summary of a person's life, isn't it? You want that on your tombstone?
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EMAIL: MANY SIDES TO THE CREATIVITY ISSUENote: The following is from Karen Lichwalla, who has founded and sold companies at least twice and whose experience proves a small but creative company can still succeed in our market. She's responding to the comments from readers in our last issue.1. Designers need to properly represent ownership of any concept or design submitted. Each page should bear some indication the designer "owns" the materials. If a company proceeds with a submission, they are liable for licensing that idea. But designers can not "just submit" an idea. Many companies have product developers. A blind submission from a designer could well be a repeat of what a company is currently developing. Often a simple phone call and some vague descriptions are enough for a manufacturer to "clear the way" for the designer to submit. 2. Vendors ripping off other vendors is not a bad thing. It is necessary for a trend to be created. Unless you have a huge marketing budget, it's actually better to have someone rip you off and split the marketing costs. The beauty of being first is that the "1st out" company has the ability to think through how they want to handle the product/concept and gain a reputation of being innovative. The 2nd and 3rd's are "me-too". As a buyer, who would you want to talk to first? Again, multiple companies doing the same thing in a new product area is good. It spreads the marketing budget which can generate more consumer interest. Plus, multiple vendors gives the buyers a comfort level that the product (whomever they buy from) will be successful. 3. Buyers working with their buddies is a hard one, but the buyers are trying to solve their internal operational issues. They probably have significant placement with one manufacturer, while a small manufacturer has one or two small things. If you look at it from the buyers' viewpoint, they can't handle a 1- or 2- item vendor in their system; it's too expensive. So, is this is a problem for a small company starting out? Absolutely. It's brutal. No solutions here, just a "reality and understanding check". 4. Buyers' hesitancy to try a new product: the answer is marketing and communicating to the buyer what the manufacturer is doing to generate consumer interest. If it's a new product or technique, the consumer has to be educated. Minus a strong consumer communication-marketing program (which can be done fairly inexpensively), the product will probably fail. If it's a product that obviously solves a problem, and the packaging alone communicates this, the product will place and sell through easily. 5. Prices. The beauty of a truly new product is that there is no perceived retail price. Within reason, any price the consumer accepts is viable. If you have something truly new, it is possible for the manufacturer to build into his/her margins the "costs" of doing business with a major retailer. Otherwise, the company who controls its overhead the best is going to make the most money. Each company has to judge what "enough" is, and if its margins on the new line aren't enough to let the company stay in business, officials should look at other growth opportunities, prior to putting the product on the market.
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RANDOM NOTES, RANDOM THOUGHTS1. I could almost see the vendor shaking his head as he talked over the phone: He had sold a drug store chain in the mid 90's, but finally gave up because they constantly nickeled-and-dimed him for extra money. Last week he received an invoice for almost $2,000 for "defective merchandise". Hmmm. He hasn't sold the chain since 1998.Maybe the chain does collect a little money from vendors who aren't paying attention, but companies who make demands like this are sending out a message that they're in deep financial doo-doo, and vendors start making plans to stop selling them. 2. Interesting report in the Hartford Courant about the growing number of toys that appear to be equally popular with boys and girls. This might be an even stronger trend, the report said, except some manufacturers assume a new item will be for one sex only, and some retailers, assuming the same thing, will take a product with both-sex potential and display it in a boys or girls aisle. If you're developing a kids' line, be careful what you assume. 3. File this under "I don't understand big business". Kmart's board of directors paid the new CEO, who was hired last May, $8.1 million last year. If a Kmart clerk made $7/hour for 30 hours a week, he or she would have to work 741 years and 9 months to make that much. 4. Recent issues of CLN have had quite a bit of worrisome news, so here are a couple of bright spots: Mark Lee of AMACO reports Friendly Plastic sales are booming, and Richard Hanks of Carolina Manufacturing reports his bandanna sales are booming. The craft market comprises about 25% of Richard's sales and its growing. Another growth area for bandannas is the pet industry -- "Yes, dogs wear bandannas," Richard reports. 5. I am delighted to see Grace Publications has published an updated version of Bows Step-By-Step, by Jane Berry. It's one of the best-selling instruction books (600,000+ sold) in our industry's history and now includes new ribbons. Jane is one of our industry's nicest people. Call 217-446-0224; email kristy@gracepublications.com. 6. If you are interested in kids' products, take a walk through your local OfficeMax or Staples. These office supply giants are realizing there's more to kids sales than just during the back-to-school period and are slowly expanding and/or testing year-round programs. Coloring and art supplies are the major product lines, but who knows where it will end.
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MISCELLANEOUS NEWSWAREHOUSE. Jo-Ann's opened its new 630,000-sq.-ft. distribution center in Visalia, California. The $40 million center will employ approximately 180 people by fall and utilizes special computer technology and bar coding to package and distribute orders to the 300+ Jo-Ann stores west of the Mississippi.ACQUISITION. Daniel Enterprises has acquired Fond Memories, a producer of acrylic products such as switchplates, outlet covers, magnetic and easel back frames, coasters, etc. The lines are available in open stock and most will soon be in kits. Daniel Ent. produces the Crafter's Pride products and offers the new Make It Your Way program, into which many of the Fond Memories' products will be included. TV. The 4th series of Needle Arts Studio with Shay Pendray uplinks later this month with PBS stations. This series is unlike the earlier versions because Shay will include knitting and crochet. The series is sponsored by a wide variety of needlework companies, including many of the key members of the Craft Yarn Council of America. Call your PBS station and ask for it. BANKRUPTCY. USA Floral Products said it filed Chapter 11 as it looks for a buyer for its remaining businesses, U.S. Bouquet and its import division. The Miami-based floral supply company listed $253.2 million in assets and $263.9 million in debts. ZANY BRAINY. Today is the deadline for ZB to find new financing, according to an agreement with its unsecured creditors. One major vendor, Learning Curve, stopped shipping. PROMOTIONS. Dial, makers of the Renuzit air fresheners has called upon Cindy Groom Harry and Craft Marketing Connections again. This time Cindy and her staff have created "Plush Puppy and Kitten Cone Covers" that fit over the air fresheners. They're free to consumers for three proof-of-purchase logos and $1.99 for S&H. A similar effort generated 100,000+ orders. Since Cindy started working with Dial, more than 7 million project sheets, videos, books, and kits have been sent to consumers. SHOWS. The annual meeting at the ACCI show (July 20-23) will include a 25th anniversary celebration with a video retrospective of ACCI's history. For more, call 740-452-4541; email acci.info@offinger.com; or visit accicrafts.org. RESEARCH. The latest HIA study at its consumer site, www.i-craft.com, is evidence that getting kids crafting can create life-long customers. 40% of the 500+ respondents began crafting in early childhood and 31% began as teenagers. RATING. Buckingham Research reiterated coverage of Wal-Mart at Accumulate. SAFETY. Chain Store Age reported three people have been killed in retail stores in the Detroit area in the past year. The latest was a 37-year-old woman who died in a struggle with drug store security guards who thought she was shoplifting. Some Michigan legislators are now calling for legislation requiring more advanced training for employees of security firms that provide guards for retail stores. NEW STORES. Wal-Mart plans to open only 40 new discount stores but 170-180 supercenter stores in the U.S. this year. Total capital expenditures will be about $9 billion this year, up $1 billion from last year. SHOWS. The Great American Scrapbook Convention is May 30-June 2 in Arlington, Texas. Call 801-399-4275; fax 801-399-4274; or visit greatamericanscrapbook.com. SEWING. The Southeastern Fabrics, Notions and Crafts Assn. show for Spring/Summer and immediate delivery merchandise is Sept. 7-9 in Atlanta. Contact Charles Hardwick, P.O. Box 937, Duluth, GA 30096. Call 770-448-5613; fax 770-448-2423. TOYS. The 7th annual New York Toy Preview is September 10-12, 2001 in New York ... Attendance at last month's Tokyo Toy Show was down, especially by mass merchandisers ... Toy Fair 2002 will be February 10-14; information is available at toy-tma.org ... Wal-Mart increased its share of the toy market, according to new research by NPD Group, from 17.4% to 19%. Second place was Toys R Us, which saw its share rise from 15.6% to 16.5% ... KB Toys launched KBwholesale.com, the b2b branch of KBkids.com. The new site offers kids' products in case pack quantities. It will focus on closeout toys and other kids' products, including crafts. SHOWS. Attendance at the National School Supply and Equipment Assn.'s recent Ed Expo '01 was 1,289 buyers from 554 companies. There were 383 exhibitors in 771 exhibit booths. Future dates include the new School of Product Knowledge, November 1-3, 2001 in Charlotte, NC, and The School Equipment Show, February 12-14, 2002 in Tampa, FL. The next Ed Expo is March 21-23, 2002 in San Antonio. For info, call 800-395-5550 or visit NSSEA.org.
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INTERNET & E-COMMERCE NEWSNEW SITE. ClassicCottons.com is a unique combination consumer and b2b site. Retailers may register and receive a username and password and conduct business with the company, including ordering fabric 24 hours a day. Otherwise, it is a basic site promoting the company's cotton prints and solids to consumers.PROMOTIONS. The website for independent fabric and quilt retailers, Fabshopnet.com, is offering another round of FabShop Hops. It works like this: each participating retailer and e-commerce site hides a bunny icon somewhere in their websites. Consumers who find the icon will click on it; that takes them to a registration page where they can register for more than $15,000 worth of prizes. Then they move on to other sites, looking for the icon so they can register again and increase their chances of winning. For more on the program, go to www.fabshopnet.com.
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THE CREATIVE NETWORK: JOB OPENINGSTo see a sampling of the current job openings and to contact The Creative Network, click on the "Jobs" button in the left hand column.
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THE CLN RETAIL INDEXA. C. Moore (ACMR). Last*: 9.25 ... Change**: +0.13Ames (AMES). Last*: 1.60 ... Change**: -0.49 Hancock Fabrics (HKF). Last*: 7.50 ... Change**: -0.05 Jo-Ann Stores (JAS.A) [a]. Last*: 4.07 ... Change**: -0.33 Michaels (MIKE). Last*: 30.00 ... Change**: +0.06 Rag Shops (RAGS). Last*: 2.13 ... Change**: -0.21 Wal-Mart (WMT). Last*: 49.70 ... Change**: -0.80 CLN Retail Index. Last*: 104.25 ... Change**: -1.6% Dow Jones Index. Last*: 10,126.90 ... Change**: +2.5% *Apr. 13 ** from Mar. 30 [a] voting share Note: Prices are exclusive of dividends
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LUCENT ANNOUNCES REALLY STEEP CUTBACKSJim Scatena of Floracraft apparently reads different news reports than I do, and forwarded this hot item:(SatireWire.com). Lucent will reduce its workforce by an unprecedented 120% by 2002, believed to be the first time a major corporation has laid off more employees than it actually has. Lucent stock soared more than 12 points on the news. The reduction decision came after a lengthy review of cost-cutting procedures, said Lucent Chair Henry Schacht. The initial report concluded the company would save $1.2 billion by eliminating 20% of its 108,000 employees. From there, said Schacht, "it didn't take a genius to figure out that if we cut 40% of our workforce, we'd save $2.4 billion, and if we cut 100% of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20% and save $7 billion. "We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added. Lucent plans to achieve the 100% internal reduction through layoffs, attrition, and early retirement. To achieve the 20% in external reductions, the company plans to involuntarily downsize 22,000 non-Lucent employees who work for other companies. "We pretty much picked them out of a hat," said Schacht. Among firms Lucent has picked as "External Reduction Targets," or ERTs, are Quaker Oats, American Airlines, Callaway Golf, and Charles Schwab. It's a "win-win," said Schacht, as any savings by ERTs would be passed on to Lucent, while the ERTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements. "We're also hoping that since, over the years, we've been really helpful to a lot of companies, they'll do this for us kind of as a favor," said Schacht. Employees at those companies said they were not inclined to cooperate. "This is ridiculous. I don't work for Lucent. They can't fire me," said Kaili Blackburn, a flight attendant with American Airlines. Reactions like that, replied Schacht, "are not very sporting." Inspiration for Lucent's plan came from previous cutback initiatives. In January of 1998, for instance, the company said it would trim 18,000 jobs over two years, but it reached that goal in a year. "We were quite surprised at the number of employees willing to leave Lucent in such a hurry, and we decided to build on that," Schacht said. Analysts credited Schacht's short-term vision, noting that the announcement had the desired effect of immediately increasing Lucent's share value. However, the long-term ramifications could be detrimental, said Bear Stearns analyst Beldon McInty. "It's a little early to tell, but by eliminating all its employees, Lucent may jeopardize its market position and could, at least theoretically, cease to exist," said McInty. Schacht, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
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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. Just email 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, May 7th.
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