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Creative Leisure News
2677 Ashley Ct.
Tremont, IL 61568
Phone: 309-925-5593
Fax: 309-925-9068
Email: mike@clnonline.com
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Date:
May 7, 2001 TABLE OF CONTENTSCOMMENTARY: EXPANSION PLANSPublic companies have to file forms with the SEC, listing how much they expect to spend on capital projects for the year. It's interesting to compare them:Michaels expects to increase its capital expenditures from $118 million last year to about $192 million for the year -- and Ames will reduce theirs from $127.1 million to $40 million. Michaels will spend $47 million to open 75 Michaels and 20 Aaron Brothers stores, $36 million for improvements in existing stores, $76 million for new and existing distribution centers, $16 million on information systems projects, $4 million on corporate expansion, and $13 million for other capital activities, Dow Jones News reported. New store costs break down like this: $1.25 million per Michaels store, which includes $570,000 in net inventory and $110,000 in preopening costs. For Aaron Brothers, it's $436,000 total, including $133,000 in net inventory and $28,000 in preopening costs. Ames will open 5 stores, compared to 26 last year.
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JO-ANN'S: "THE FIX IS ON THE WAY"Last Thursday Jo-Ann Stores' executives held a conference call and outlined the company's activity since the annual report was released earlier this year. Among the highlights:The new California distribution center opened on time and on budget. The company obtained a new credit facility that replaces the old one and gives Jo-Ann's increased financial flexibility (see article below). The staff has been restructured and industry retail veteran Craig Davis was hired as General Merchandise Manager for the Floral/Seasonal Department. Leases have been signed for 12 new etc stores this year, but there are no commitments yet for the following year. The staff has identified $57 million in merchandise to be liquidated. Clearance sales will begin shortly. A newly implemented "Never Out" program has resulted in the stores now being 95% in stock on best selling items. By next month all 300+ stores west of Mississippi will have been converted to the new California distribution center. The Hudson, Ohio warehouse is being remodeled to better handle seasonal goods; that remodeling should be completed in August. These changes, plus changes in the transportation system, should result in quicker store replenishment. Many of the bugs in the new SAP computer system have been worked out, allowing many more accurate sales reports to be available, including to vendors. Forecasting will now be influenced by trends rather than simply by historical data. As the computer system's data improves, look for more "vendor scorecards" and more vendors becoming involved in category management. "I am 100% confident the fix is on the way," said CEO Alan Rosskamm, who warned that financial results for much of this year will be a lagging indicator of the company's improved profit position. He expects the profit turn-around to be evident in the 4th quarter and apologized for vendors' problems caused by Jo-Ann's computer and internal problems. Due to the number of vendors who joined the conference call, AT&T's system was unable to allow questions from the vendors.
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SO, HOW BIG IS OUR INDUSTRY?" ... we believe that there have been errors made in the past with regard to our market research," says Paul Mackey (Prym-Dritz), chair of HIA's Market Research Committee. "We have reason to believe that the craft industry, as we define it, may be in fact larger than the $10 billion figure announced at the HIA Show in Anaheim in January."The Committee believes problems in previous Size of Industry studies were caused by sampling three populations -- retailers, manufacturers, and consumers. "HIA will now examine only data gathered directly from consumers in hopes of presenting a more reliable picture," a press release said. "These studies were never intended to be used as a comparative figure from previous studies, but rather a 'snapshot in time' against which future data, collected and analyzed using the same methodology, may be measured," the release continued. (Comment: The studies may never have been intended to be compared to previous studies, but of course everyone did it anyway.) "Therefore," Mackey said, "we are now taking steps to improve how we conduct this market research and examine the figures so that we can determine the true size of and trends within the crafts industry. With this in mind, we have commissioned an independent audit so that we can assure ourselves and our members that we are on the right track in terms of our approach to the research."
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A.C. MOORE: BETTER THAN EXPECTEDNet loss for the quarter was $62,000 ($0.01/fully-diluted share) compared to net income of $144,000 ($0.02) a year ago, but operating profit before pre-opening expenses rose 23.9% to $1 million and earnings/share exceeded the consensus estimate by $0.03. The pre-opening costs (3 stores opened during the quarter, 2 in April, and one relocation) were $1.1 million.CEO/President Jack Parker said, "Not only did we significantly exceed estimates, we did so in a difficult environment for retailers. This quarter demonstrates A.C. Moore's capability of achieving our earnings/share expectations of $1.08 to $1.10 for the year."
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MICHAELS, JO-ANN'S OBTAIN NEW FINANCINGJo-Ann's obtained a new 4-year $365 credit facility from a lender group led by Fleet Retail Finance. The prior senior credit facility had $187 million outstanding, including outstanding letters of credit, as of April 24.Interest on borrowings under the credit facilities is calculated at the bank's base rate or London Interbank Offered Rate ("LIBOR") plus 1.75% to 2.25%, depending on the level of excess availability that is maintained. The credit facilities provide for the applicable LIBOR margin to be set at 2% for the first year of the term of the facilities. Michaels announced it has closed on a $200 million Senior Unsecured Revolving Credit Agreement, which replaces the $100 million facility set to expire on August 28th. The lender group is led by Fleet National Bank. The interest rate ranges from LIBOR plus 75-150 basis points, depending on the fixed charge coverage ratio, and will mature on May 1, 2004.
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ALEENE & FAMILY RETURNTony Hirshman, Aleene, Tiffany Windsor, and Heidi Borchers are back in the industry with Craft Home And Style. The operation consists of a website (crafthomeandstyle.com with an e-commerce area), a television series, a craft club, and a magazine, now in its third issue.Tony is president; industry veteran Steve Wiggins is in charge of sales. For an $11.95 fee, members of the club receive the magazine, a booklet with 50 or more project sheets, coupons, free products, and more. The website includes free projects, articles, a chat room, message boards, and a newsletter. The site's e-commerce area offers a very wide range of craft products -- about 10,000, Hirshman estimates. The magazine is now going to be distributed on newsstands by IDD, which distributes numerous other industry-related titles. The television series will premiere in July. Hirshman says negotiations with a network are in the final stages and he anticipates an official announcement next week. It will be a half-hour show broadcast on the weekends. The series will be hosted by Tiffany Windsor, host of the former Aleene's Creative Living series. Aleene and Heidi Borchers will be occasional guests. Tony, Tiffany, and Heidi are the son and daughters of Aleene, one of the industry's pioneers. They were principals in the Artis/Aleene's company which was liquidated after its second bankruptcy. Many of the products (glues, etc.) from that company were purchased in 1998 by Duncan.
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COMPANY FOR SALEOwners of a small Midwest manufacturing company have decided to retire. The company is THE player in a small category. 2000 net sales: $440,000; net income: $135,000; employees: 6, plus the owners. Includes a 4,000 sq. ft. facility in an industrial park. The business could be relocated with 3-4 semi-trailer loads. Price: $400,000, plus $200,000 for the facility, if the buyer wants it. In light of current product trends, the company has a strong potential for growth.For more information, in complete confidence, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.
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10 RULES FOR BOOSTING SALES TO INDEPENDENTSManufacturers are paying more attention to independents these days. Independents' needs/interests are somewhat different than the chains', so CNA magazine asked me to write an article on what, exactly, independents want. That way, vendors can serve them more effectively.I emailed numerous independents asking them what they wanted from vendors, and the results will appear in the July issue of CNA. After the article was finished, the following piece arrived from one of the most well known and successful independents in the industry (who asked that his name not be used). His thoughts truly summarized my CNA article: 1. Make an appointment with the buyer as far as possible in advance. Don't be fooled by appearances -- we do plan our activities. 2. Don't bother with an expensive dinner or lunch. It won't influence our buying and we don't usually have time, although we do enjoy those rare events. Take the cost off the invoice. 3. Be prepared to offer your best price and deal quickly- -- we have dealt with all types of gimmicks and smoke screens in our years of buying. What an education! Settle the price quickly and put it on paper. 4. Have the ability to provide important info about your product with you. Many reps can't provide items like catalogs, UPC numbers, price lists, etc. "We'll get it for you later" is a real turn-off. Some independents even have POS, computers, faxes, phones, and color TV. 5. Send your green and weak sales reps; we will train and educate them so they are more valuable to you. But send somebody! 6. Bring us product knowledge and POP material -- We LOVE to sell your products. You won't find it languishing in our warehouse or stockroom six months after you ship. Need a test store who knows what's going on? WE'RE IT -- at no extra charge! 7. Don't bellyache about the latest huge bankruptcy and use it as an excuse not to give us the best price -- that only tells me that greed overtook your brain and I'm now going to pay for your mistakes. I represent one-third of your potential market share and I need to be competitive with prices that have been driven down by special discounts costs and allowances to other segments in the industry. Spread your risks -- all eggs in one or two large baskets will not pay in the long run. Huge companies are teetering as well as small companies. I also have acceptable losses -- bad checks, internal and external theft, bad weather, and price-conscious good customers. I am amazed when I receive a copy of an invoice from my best friend who works for a large competitor. How in the world did you expect to make a profit by giving that much away just to get additional volume? Ad money, return allowances, repackaging, bad UPC label charges, freight allowances, 90/120 days dating, shelf allowances, credits to replace present vendors lines, private vendor shows, and on and on and on. Protect your gross and I'll protect mine. We LOVE for our vendors to stay in business and make money! 8. KEEP your promises! Three strikes and you're out. 9. Above all, be honest. If we're not going to be on a level playing field, tell us. Expect us to do the same in return. 10. For following the aforementioned, we promise to reward you with consistent, frequent orders of considerable size (12 dozen per store X 1,000 independent stores = 12,000 dozen). We will be your best salesperson, your most loyal supporter, your best long-term customer. When you are weak in your knees, we will hold you up and help you to walk and run again. We will be your strength and support in difficult times. We will find uses for your products you will never dream of. We promise not to discard you like a pair of old shoes. We will cherish and value our business relationship and the whole time we will be mean and tough as hell. We love our LOYAL vendors!
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COMMUNICATING WITH INDEPENDENTSOne of the major complaints by independent retailers, in response to my ad hoc survey for the CNA article, was how ill-informed they are about manufacturers' products, policies, and personnel. No vendor can stay in business by doing everything every customer wants, but communication can be relatively simple and inexpensive. Here are some suggestions:1. Trade publications. Bombard Creative Leisure News, CNA, and Craftrends with press releases about new products, shipping policies, personnel changes, etc. Publications often don't always have room for everything, but it's free. 2. Do you have a website? Start a special section for retailers, accessible via a password (like you use to read Creative Leisure News), and list complete product descriptions, detailed company policies, minimums, distributors who carry the products, etc. (Software to handle passwords is readily available and easy to adapt to your needs. The software used for CLN's password system is available for about $200.) 3. Start a simple company newsletter. It can be short and printed only when you have something to say. 4. Fax company news to retailers. There are broadcast fax services available; you email the notice to the company and it does the rest. (When I started CLN, almost all the subscribers received the issues via fax and I used a company that proved to be very reliable and helpful. I'd be happy to recommend the firm to anyone interested.) 5. Hire a free-lance, part-time public relations pro. (There are a number of excellent ones in the industry. I'd be happy to recommend some.) Ever notice how some industry companies receive a lot more trade and consumer press? It's not because they're pals with the editors or spend a fortune on advertising; rather, they recognize the importance of public relations and pay attention to it.
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RANDOM NOTES, RANDOM THOUGHTSFor you and your scrapbooking customers: Ellis Island now has all its records online at http://www.ellisislandrecords.org. The site includes technology allowing people to build their own family scrapbook online.But there's a catch: The site is almost constantly overwhelmed with visitors. I have been trying for weeks, at odd hours, to learn about my grandmother and am having a terrible time getting through. Tell your customers about the site, but tell them to be patient, very patient.
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MISCELLANEOUS NEWSMAGAZINES. Bill Stephani was named Managing Editor of CNA, in addition to his duties as Editor of Craft Supply Magazine. Both are published by Krause Publications which named industry magazine veteran Linda Augsburg Editor of Michaels Create! magazine. Julie Meyer Senn and Lisa Wilson will also be joining the bi-monthly's staff as Associate Editors. Augsburg succeeds Julie Stephani, who has become the Editor for Krause's Craft Book division ... K Mart, Barnes & Noble, and the Albertson's grocery chain (1,800 stores) are now selling Michaels Create!, bringing the magazine's total number of outlets to more than 20,000.ZANY BRAINY. Today is the deadline -- after two other extensions -- of a "standstill agreement" with the informal committee of unsecured creditors, giving ZB time to secure new financing ... ZB received a NASDAQ delisting notice, and filed a late notification with the SEC regarding its 10-K for the fiscal year ended Feb. 3 ... The board named Thomas Vellios CEO. He had been Acting CEO since September. He joined ZB in 1995 after a senior exec post at Caldor. ACCI. As of Friday, the July 20-23 show in Chicago will have 493 exhibitors, up 16%. There are 120 first-time exhibitors. Buyer advance registration is 3,106, up 11%. The show floor plan is available online at accicrafts.org. ACCI exhibitors: Soon you'll receive info on Focus Group Forums, where you can submit your product to a focus group. For more, call 740-452-4541; email acci.info@offinger.com; or visit accicrafts.org. ROLODEX. The Sierra Pacific Crafts headquarters has moved to 1379 Pacific Highway, Ste. 300, Woodburn, OR 97071. Call 503-981-6007; fax 503-981-6009. BANKRUPTCY. HomePlace of America will close all of its remaining 62 stores and will auction its remaining assets later this month. The company, formed June, 1999 by the merger of the former Waccamaw and HomePlace organizations, had filed for Chapter 11 bankruptcy protection in January. JOBS. West coast needlework manufacturer is looking for a national sales manager ... Another west coast manufacturer, in crafts, is looking for a Wal-Mart specialist. For more on either/both jobs, email Mike Hartnett or call 309-925-5593. Confidentiality assured. SALES. Michaels releases its April sales results this Thursday and hosts a conference call at 7 am CDT to discuss the results. To participate, dial 973-628-6885. You can also listen to the call at videonewswire.com. To listen to the live call, go to the site at least 15 minutes early to register, download, and install any necessary audio software. A replay will be available May 17th at thefirstnews.com or by calling 973-341-3080, and using PIN# 2449763. MARTHA. On her tv show this Wednesday, Matha Stewart will decorate a Bagworks apron as a kids project. MEDIA. Decra Led from EZ Craft was featured several times one day last month on HSN and was "Today's Special Value". It sold out before the last show was aired and because of its popularity, it will be showcased again on May 25th. The line is used to make faux stained glass and includes rolls of self-adhesive lead, sheets of colored film, patterns, squeegee, and cutting knife. It will also be featured on Decorating With Style on HGTV this fall ... EZ's Mosaic Mania Sampler kit (distributed by Darice) will be featured on HSN this Friday. PEOPLE. Industry veteran Joe Mishkin is now President of Marathon At Home, an upscale decorative pillow and bedding company. SEWING. Last weekend the Home Sewing Assn. sponsored Designer for a Day, at the Bridgewater Commons Mall in Bridgewater, NJ. The 3-day event included displays of sewn items, demos of computerized sewing machines and 16 stations staffed by trained volunteers to assist consumers in creating one-of-a-kind accessories. Listings of sewing classes throughout New Jersey were also available. ACQUISITION. Bareco Products purchased the specialty wax division of Walnut Hill. Call Bareco at 803-327-3663. AWARD. ShopKo named Sakura Vendor of the Year in the School and Home Office Supplies category. RATING. Adams Harkness upgraded Michaels to Strong Buy and Hoak Breedlove Wes upgraded Michaels to Buy ... Tucker Anthony Sutro dropped coverage of Ames at Market Perform ... Bear Stearns and Robertson Stephens reiterated coverage of Wal-Mart at Buy. FABRIC. Hancock opened a Waverly Showcase within its Internet store at hancockfabrics.com in order to sell Waverly fabric, bedding materials, pillows and other related items. CEO Larry Kirk said the addition "is a natural progression that parallels our efforts to include the Waverly Showcase as a separate department in our physical stores." LAWSUIT. Barnes & Noble and Borders each agreed to pay out $2.35 million to defray the plaintiffs' legal costs to settle a lawsuit filed by the American Booksellers Assn. that claimed the two chains illegally demanded major discounts from publishers. TNNA. The June 9-11 show in Columbus, Ohio will have 464 booths -- the floor was expanded for additional exhibitors, including 19 new vendors. TNNA's Phoenix Needlecraft Market is August 26-27 and the 2002 winter show is January 12-14 in San Diego. For info, call 740-455-6773, Fax: 740-452-2552; email tnna.info@offinger.com, or visit tnna.org. ENGLAND. The Society of Craft Designers is sponsoring a trip to England October 6-14. The trip will include private lectures at Victoria & Albert Museum in London and the Stoke-on-Trent City Museum in "The Potteries" area of the country, plus visits to a variety of other artistically inspiring and educational sites. Carlson Wagonlit Travel is the booking agent. For into, call 800-878-6767, ext. 3170; fax 614-501-1101; email jblackburn@offinger.com; or visit carlsontravel.com/zanesville. SHOPA. The School, Home, and Office Products Assn. show in Miami Beach has been reduced to three days, despite the fact that 13,520 buyers attended last year, an increase of 41%. Now it's November 14-16. Call 937-927-2250 or visit shopa.org. DESIGNERS. More than 200 designers, publishers, and manufacturers are expected to attend the 26th annual Education Seminar sponsored by the Society of Craft Designers will be September 5-8 in Phoenix. Peter Russo, one of the industry's top product developers in the craft and creative industries, will be one of this year's guest speakers. Russo will speak on Product Development: Science or Art? and Creative Communications: Manufacturing Meets Design. For info, call 740-452-4241; fax 740-452-2552; email scd@offinger.com; or visit craftdesigners.org.
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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**: UNCAmes (AMES). Last*: 2.72 ... Change**: +1.12 Hancock Fabrics (HKF). Last*: 8.49 ... Change**: +0.99 Jo-Ann Stores (JAS.A) [a]. Last*: 4.45 ... Change**: +0.38 Michaels (MIKE). Last*: 33.50 ... Change**: +3.50 Rag Shops (RAGS). Last*: 2.29 ... Change**: +0.16 Wal-Mart (WMT). Last*: 53.02 ... Change**: +3.32 CLN Retail Index. Last*: 113.72 ... Change**: +9.1% Dow Jones Index. Last*: 10,951.20 ... Change**: +8.1% *May 4 ** from Apr 14 [a] voting share Note: Prices are exclusive of dividends
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A TALE FOR OUR TIMESAn unemployed man applies for a janitorial job with Microsoft. The HR manager says, "You will be employed at minimum wage, $5.15 an hour. Let me have your email address so I can send you a form to complete and tell you where to report for work."The man says he doesn't have one. The manager replies, "That means you virtually don't exist and can therefore hardly expect to be employed." The man leaves. Not knowing where to turn and having only $10 in his wallet, he buys a 25 lb. flat of tomatoes at the supermarket. Within two hours, he sells each tomato at 100% profit. After repeating the process several times that day and earning almost $100, he realizes he could make a living selling tomatoes. He works very hard and quickly multiplies his profits. Soon he acquires a cart, and later a pickup truck to support his expanding business. By the end of the second year, he owns a fleet of pickup trucks and manages 100 formerly unemployed people, all selling tomatoes. Planning for the future of his wife and children, he decides to buy some life insurance and picks a plan to fit his new circumstances. The salesman asks him for his email address in order to send the final documents electronically. When the man says he has no email, the salesman replies "How on earth have you managed to amass such wealth without email? Just imagine where you would be now, if you had been connected to the Internet from the very start!" After a moment of thought, the tomato millionaire replied, "Why, of course! I would be a janitor at Microsoft!" Morals in this story: 1. Email does not need to rule your life. 2. If you don't have email, but work hard, you can still become a millionaire. 3. Since you got this story via email, you're probably closer to becoming a janitor than you are to becoming a millionaire. 4. If you do have a computer and email, you have already been taken to the cleaners by Microsoft.
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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, and 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 21st.
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