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Creative Leisure News
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Date:
May 21, 2001 TABLE OF CONTENTSCOMMENTARY: THE SIZE OF OUR INDUSTRYIn our last issue we published a report based on an HIA press release saying due to possible errors in previous Size of Industry studies, the industry "may be in fact larger than the $10 billion figure announced at the HIA Show in Anaheim in January."Shortly after that issue of CLN was published, HIA rescinded the press release and a few days later issued a new release that said, in part, "We have reason to believe that the craft industry is significantly [my emphasis] larger than the $10 billion figure announced at the HIA Show in Anaheim in January." Clearly, there is confusion regarding Size of Industry studies. To better understand the situation, let's look at a little history. Here's how industry pioneer Bill Mangelsen of Greensward remembers the first "study": "I read in your latest newsletter the article titled So, How Big Is Our Industry?' Reminds me of something that happened long ago. "As you know Jack Wax started the craft trade magazine, PCM, and was a great promotor of crafts and, of course, PCM. "He and I were chatting at an HIA show in the late 60's at the Sherman House in Chicago. His latest issue of PCM reported that the craft industry was now at $200 million. "I asked, Jack, where did the figure of $200 million come from?' "He looked around to see if anyone else could hear, and admitted he took the figure out of the air, saying, We have to start somewhere, so let's start there.'" In the late 70's and early 80's, the HIA staff tried to collect the data. But the HIA board was dominated by hobby companies (in fact, the executive director was the son of a hobby industry pro) and HIA's rules said, the higher your sales, the higher your HIA dues. The end result was craft companies drastically under-reporting their sales, if they reported them at all. Finally HIA gave up attempting to collect the data. For many years, there were no studies at all, and Karen Ancona (CNA's editor), the HIA staff, and I (then editor of the now defunct PCM magazine) were bombarded by market research companies, outside investors, bankers, etc. virtually demanding that we give them a number for the size of the craft industry. We would explain there was no number -- too many privately held companies that wouldn't divulge their sales, etc. -- yet many would insist we pick a number, any number. One year Karen, myself, and an HIA staffer (who would probably prefer to remain nameless) had a drink at the HIA show and compared notes. Since many of these folks called all three of us, we decided we'd pick a number and we'd all use that throughout the year. We picked $3 billion and did just that. (We even saw the number quoted in major newspapers). At the next HIA show we met for a drink, decided the industry had grown 10%, so we used $3.3 billion the following year. If we'd had more than one drink, who knows how big the industry might have been? Finally the demand was so strong, HIA devoted substantial resources to hiring a reputable market research firm to conduct studies. That continued for much of the 90's. Recently HIA switched research firms and apparently has encountered some problems. The staff and the Market Research Committee (industry folks like you who have volunteered their time) will work it out and once again will announce some number that is, for all intents and purposes, the "size" of our industry.
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COMMENTARY: WHY SIZE OF INDUSTRY MATTERSWhy should HIA care? Why should you? Here's when it matters:When you want to sell your business or need a loan or outside investment. The bankers, investors, and buyers who are not familiar with our industry cannot get a handle on us, or your business, without a size of industry number. All of these people seem to think, "Why should I give you money if you're part of an industry that can't even figure out how big it is?" I served on the HIA Market Research Committee for about 10 years, and on the HIA Board, which approved spending the money on the research, for six years. I did so, knowing full well that Bill Mangelsen is right when he says trying to arrive at a truly accurate number is like "trying to nail Jello to a wall." I am sure that these Studies have lots of mistakes, because every study in every industry has them. For example, does every retailer who sells any product we arbitrarily put under the craft umbrella really sit down and figure out to the dollar how much he sold in needlework, painting, scrapbooks, florals, fabric, etc., etc., etc.? Does every consumer remember every penny she spent on supplies? I don't think so. Still, we gotta have a number. The HIA study produced by the professional market company, the HIA staff, and the Market Research Committee will be as close to the truth as fallible human beings can get.
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HANCOCK FABRICS: PROFITS UP 14%Net earnings for the 13 weeks ended April 29, 2001 increased 14% to $2.5 million ($.15/diluted share) compared with $2.2 million ($.12) a year ago. Sales decreased 0.5% to $97.6 million and same-store sales rose 1%.CEO Larry Kirk attributed the profit increase to better gross margins and expense controls. "Although our business may not be impacted by the general economic weakness as much as some other retailers," Kirk added, "there is no question that customers are more hesitant than they were at this time last year. The higher gross margin was once again due to the ongoing shift in our merchandise mix, better obsolescence management and rational price promotion." Kirk said the company plans to aggressively expand its Waverly Showcase home decorating concept, enhance its quilting assortments, and refine its home accent department. "We expect that the number of new store openings during the next two quarters will be higher than we have experienced recently," Kirk added, "and we are actively reviewing other opportunities for store locations that are arising from the continuing fallout in retailing throughout the country. "While overall economic conditions and liquidation pressures within our industry may create some choppy waters for a time, the company is well positioned to execute our operating strategy and to react to opportunities ...," Kirk concluded. Hancock opened three stores and closed seven during the quarter. The current store count is 439 in 42 states. The company also has 100-plus independent wholesale customers and operates e-commerce sites at hancockfabrics.com and homedecoratingaccents.com.
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AMES' QUARTER: BAD, BUT BETTERThe bad news about Ames' first quarter ended May 5th: a net loss of $27.7 million ($0.94/share). The good news: It was an improvement over the net loss a year ago of $29.1 million ($0.99/share).Net sales fell 4.5% and same-store sales dropped 6.8%, although Chair/CEO Joseph Ettore said the gross margin rate had improved to 28.7% and April was actually profitable. He said sales were "above plan" for February and April, but March was hurt by bad weather. The quarterly report was released last Thursday. The day before, the stock fell 9.52% to $2.47, the same day the Dow rose 343 points.
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APRIL SALES MIXEDAmes overall sales rose 1.2% for the month but fell 4.5% for the first quarter. Same-store sales rose 0.8% in April but fell 6.8% for the quarter.Jo-Ann's reported net sales increased 1.1% to $328.9 million for the first quarter, but same-store sales decreased 2.0%. April same-store sales decreased 3.7%, due in part, officials said, to a shift in the Easter holiday. Earnings will be released May 22 with a conference call at 10 am EDT. Go to www.joann.com, click on "About Jo-Ann," then click on "Investor Relations" under the heading "Our Company," then click on the "Conference Call" icon. Michaels sales increased 7% to $153.4 million; same-store sales rose 1%. To listen to a tape of a conference call between Michaels officials discussing the results with interested parties, surf to www.thefirstnews.com or call 973-341-3080 and use PIN# 2449763. The replay is available until Thursday. First quarter earnings will be released May 30th, with another conference call that day at 4 pm CDT. To participate, call 973-628-6885. Other retailers' same-store sales figures: Wal-Mart, +6.5% ... Kmart, +1.1% ... Target, +1.0 ... Pamida, -3.2%.
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ZANY BRAINY IN CHAPTER 11Zany Brainy filed for Chapter 11 bankruptcy protection May 15th. ZB, with 187 stores in 34 states, has a commitment of $115 million in Debtor-in-Possession financing from Wells Fargo Retail Finance subject to court approval.A company press release said, "The company believes that this financing package will provide sufficient funding to resolve its liquidity issues and normalize relations with its vendors in order to keep its stores well-stocked with the most up-to-date merchandise." ZB estimates that funds will be available for distribution to unsecured creditors. The top unsecured creditors are Ingram Books ($5.1 million) and Valley Media ($4.8 million). "The company has been working closely with its vendor community to address trade claims and expects their continued support of the Zany Brainy strategy and brand." Problems cited by management include acquiring 60 Noodle Kidoodle stores, opening 27 new ZB stores, sinking money into the ZB e-commerce site, and the lack of a hot new toy. The stock sold for 33 cents/share when trading was halted. The company had gone public in 1999 at about $12 and reached an all-time high of about $14. The 52-week range was $0.18 - $4.00. ZB had been having serious liquidity problems and arranged a stand-still agreement with an informal committee of vendor/creditors, who agreed not to take action while the company searched for additional funding. The committee extended the deadline four times, the last deadline being May 14th. When additional funding had not been secured by then, ZB filed for bankruptcy the next day.
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THE ADVANTAGES AND PITFALLS OF ACQUISITIONSIn the previous issue of CLN we published a notice about a small company for sale. (Click on the "CLN Archives" button to re-read the issue and the sale notice.) We have published similar items over the years, but this one generated more responses, by far, than any similar item.Why such interest in a small company? Respondents told me it is becoming easier to grow a company through acquisition than through new products. It is becoming so difficult to gain shelf space for a new product that it's easier to buy a company that already has shelf space. The strategy makes sense -- Duncan and Plaid are good examples. But it can be dangerous. Ames' acquisition of the Zayre chain put the company in bankruptcy; it recovered, but its purchase of Hills has certainly caused problems -- Ames' stock dropped 95% last year. Now we see Zany Brainy in bankruptcy, in part due to its acquisition of Noodle Kidoodle.
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TANDYCRAFTS IN CHAPTER 11Tandycrafts filed for Chapter 11 bankruptcy protection, listing $64.5 million in assets and 56.3 million in debts, Bloomberg News reported. There was no report of the company obtaining debtor-in-possession financing.Tandycrafts began selling shoe leather in 1919 as Hinkley-Tandy and later became Tandy Corp., which acquired the Radio Shack chain in 1963. Twelve years later the corporation spun off the leather and crafts businesses, and Tandycrafts became a separate company. Tandycrafts bought and sold various companies over the years; in February it sold its Cargo Furniture division to Pier 1 Imports to concentrate on leather kits and supplies and wall decorations. The stock had been traded on the New York Stock Exchange but was delisted earlier this month at 4 cents/share. A year ago the stock traded at $3.13. A Little History: At one time Tandycrafts owned American Handicrafts (500 stores), along with Leewards, the first industry-related chain stores. Tandycrafts also owned Merribee Needlecrafts and Tandy Leather, which was later sold to The Leather Factory.
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NEW MEDIA COMPANYTiffany Windsor Media is the exclusive licensee to produce the Craft, Home & Style tv series (a network is yet to be announced). The company is led by Tiffany Windsor, the former host of Aleene's Creative Living tv series.TWM has been publishing InspiredLifestyles.com, a monthly online magazine for women, since last July. TWM has also recently launched Inspired at Home with Heidi Borchers. The first segment of the tv series will be taped on location at the Tall Mouse store in Irvine, CA on June 9th. Scheduled regular guest appearances will include Aleene Jackson, Heidi Borchers of InspiredatHome.com and "homescape" expert, David Ryan of Everyday at Home. TWM is sponsoring a contest with the winners to be guests at the first taping. Entries can be made online at crafthomeandstyle.com and at all Tall Mouse locations. Deadline: June 1. For more, contact Tiffany Windsor Media. P.O. Box 50206, Pasadena, CA 91115; phone 626-403-6677; fax 626-403-0793 fax; email tiffany@tiffanywindsor.com; visit tiffanywindsor.com. TV sponsorship is available; contact Steve Wiggins: 515-462-4439.
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RANDOM NOTES, RANDOM THOUGHTS1. My computer crashed four times one day last week, for no apparent reason. If our products were as inconsistent as computers, our industry would have died decades ago.2. Here's a sign of the times: Last Thursday night was the much ballyhooed season finales for such hot television series as Friends, CSI, Will & Grace, and ER. So what was QVC selling during those time periods? Scrapbooking and craft supplies. 3. In recent years there have been times when a major buyer has sent a letter to all vendors categorically refusing all price increases. If any buyer is thinking of writing such a letter, first talk to the head of your company's human resource department and ask how much the company's medical insurance costs have risen in the past year. Sending out a "no price increase" letter today is, in effect saying "I deserve health insurance but you and your employees don't."
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MISCELLANEOUS NEWSQUILT. We're receiving reports that set-up day at the Quilt Market in Atlantic City is a disaster. The Sheridan overbooked -- so some attendees are staying in hotels as far away as 30 miles. The shuttle buses are a mess, too, we hear.WAL-MART. Quarterly sales rose about $5 billion over a year ago, and net income rose 4.1% to $1.38 billion. Earnings/share rose a penny to 31 cents, in line with analysts' estimates. The discounter also plans to repurchase up to an additional $3 billion of its outstanding shares. PEOPLE. DMC promoted Greg Cummings to National Sales Manager and Stephen Mancuso to Director of Marketing. TV. NSI's Bedazzler, which has received more national publicity than any craft product in recent memory, was mentioned last week by Dennis Miller on his HBO series. He said when he's stuck in traffic he likes to "Bedazzle" his shirts! (Hope he doesn't try it when he's driving.) SHOWS. NAMTA is coming soon -- June 2-4 in Chicago. Call 704-948-5554; email info@namta.org ... TNNA in Columbus, Ohio -- June 9-11. Call 800-889-8662 or email tnna.info@offinger.com ... Silk 2001 is June 23-26 at the Dallas Market Center. Call 214-655-6100 or visit dallasmarketcenter.com. PROMOTIONS. HIA's second promotion in its three-part initiative starts June 17 and culminates with a "Celebrate America With Crafts" day Saturday, June 30. It's to support HIA's Crafts. Discover Life's Little Pleasures branding campaign. Last month HIA distributed posters, "customizable" press releases and radio PSA announcements, and promotional tips to members. Members can purchase additional posters, as can non-members. Call Lisa Marchese at 201-794-1133 or email lmarchese@hobby.org. TV. For Your Home producers have released the 10th season of this PBS series which will air this summer and through the fall. Each installment has a craft corner and this season includes demos/instructions to make candles, decorate a child's room with accessories, etch a window and cake plate, paint a serving tray, faux finish wood moldings, create a memory cabinet, stitch a hammock, and decorate walls with stamps and paint. For more info, visit the FYH web site at www.foryourhome.com. Major funding is provided by Delta and Stacy's Greenhouses with additional production support from Home Depot, Thomasville Furniture Industries and Wood Armfield Furniture. FYH is co-produced by Cutters Productions and the U. of North Carolina Center for Public Television. TOYS. The Toy Manufacturers of America has changed its name to the Toy Industry Association (TIA). Officials say it's designed to reinforce the association's growing emphasis on areas of the toy business besides the manufacturing community. RATINGS. Ladenburg Thalmann reiterated coverage of Ames at Near-Term/Long-Term Hold ... Wedbush Morgan reiterated coverage of Michaels at Buy ... Banc of America and Bear Stearns reiterated coverage of Wal-Mart at Buy. DATA. For years Wal-Mart sold its sales data generated by electronic scanners at checkout counters. Market research companies would buy the data and sell it to the discounter's competitors. Wal-Mart officials decided AWARD. DMC is again sponsoring the Designer of the Year award. To nominate a designer, call Jill Reed Siroty by May 25th at 973-589-0606, ext. 3011, or email jsiroty@dmc.fr.
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INTERNET AND E-COMMERCE NEWSEDUCATION. HIA recently posted a new white paper at "A Starting Place for eCommerce" at the member level of its site at hobby.org.HUH? Here's what the press release says: "CraftClick.com, Inc. (CraftClick Utah), a Utah corporation, (OTCBB:CTCK) announces that it has merged with CraftClick.com, Inc. ( CraftClick Delaware'), a Delaware corporation, for the purpose of re-domestication of the company and effecting a reverse stock split. Under the terms of the merger, CraftClick Delaware will issue 1 new share for every 100 shares of CraftClick Utah. In conjunction with the merger, the company has been assigned a new trading symbol CFTC. The company will begin trading under the new symbol May 9, 2001."
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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*: 12.10 ... Change**: +2.85Ames (AMES). Last*: 2.73 ... Change**: +0.01 Hancock Fabrics (HKF). Last*: 8.54 ... Change**: +0.05 Jo-Ann Stores (JAS.A) [a]. Last*: 4.30 ... Change**: -0.15 Michaels (MIKE). Last*: 36.45 ... Change**: +2.95 Rag Shops (RAGS). Last*: 2.50 ... Change**: +0.21 Wal-Mart (WMT). Last*: 52.04 ... Change**: -0.98 CLN Retail Index. Last*: 100.50 ... Change**: +4.3% Dow Jones Index. Last*: 11,301.70 ... Change**: +3.2% *May 18 ** from May 4 [a] voting share Note: Prices are exclusive of dividends
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WHY WE LIVE SO LONGOn the first day, God created the cow and said, "you must go to the field with the farmer all day. You will work all day under the sun and I will give you a life span of 50 years.""What?," said the cow. "This kind of tough life for 50 years? Let me have 20 years, and the last 30 years I'll give back to you." So God agreed. On the second day, God created the dog and said, "You will sit all day by your house and as people pass by, you will have to bark at them, and you'll have a life span of 20 years." The dog objected. "No way! Let me live for only 10 years. I give you back my other 10 years of life." So God agreed. On the third day, God created the monkey and said, "You will entertain people, making them laugh by doing monkey tricks. And I'll give you a 20 year life span." The monkey objected. "Ten years will do, and the other 10 years I'll give back to you." So God agreed. On the fourth day, God created man and said, "Your job is to sleep, eat, and play. All you need to do is to enjoy life. For this, I'll give you a 20 year life span." The man objected. "Why don't we make a deal? Since the cow gave you back 30 years, the dog returned 10 years, and the monkey gave you back 10 years, I will take them from you! That makes my life span 70 years!" So God agreed. AND THAT IS WHY... In our first 20 years, we eat, sleep, play, and do nothing much. For the next 30 years, we work all day long. For the next 10 years, we entertain our grandchildren by making monkey faces and doing monkey tricks. And for the last 10 years, we stay at home, sit in front of the door, and bark at people.
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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, June 4th.
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