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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:
June 4, 2001 TABLE OF CONTENTSCOMMENTARY: YOUR TAXESDon't expect the industry to get much of a boost from the tax-cut bill passed by Congress. Consumers will probably use the money to pay for higher gasoline bills. However, those gas bills would have been higher anyway, so the tax cut may help us avoid a tougher summer.There had been talk in Washington of a second tax-cut bill, this one geared towards business, but the Democratic takeover in the Senate is expected to nix that -- unless some tax breaks are attached to a rise in the minimum wage. President Bush is on record against boosting the minimum wage, but if the Democrats make it more palatable to business, he may reconsider.
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MICHAELS: PROFITS RISE 18%Net income for the first quarter was $9.7 million ($0.30/diluted share), before one-time charges, compared to net income of $8.2 million ($0.25/diluted share) a year ago. The company took one-time, after tax charges of $600 thousand for severance agreements with some former senior execs. Sales for the first quarter were $524.7 million, up 11%; same-store sales rose 3%.Michael Rouleau, President/CEO, said, "We are very pleased with our performance in the first quarter, particularly in light of the soft economy and the significant investments we are making in support of our strategic initiatives." In a conference call execs said: Look for same-store sales in the 204% range ... The quarter's best performing categories were custom and readymade frames, seasonal, crafts, and ribbon ... The goal remains to boost sales to an average of $5 million/store ... The traditional Dollar Days promo will be moved earlier in summer to avoid overlap with back-to-school programs ... The company will move a third-party distribution center from Jacksonville, Florida, to Savannah, Georgia to lower shipping costs ... Michaels is planning a training session for 200 vendors on packing and shipping to stores ... Target, Kmart, and Barnes & Noble will test selling Michaels Create! in their stores. To hear a replay of the call, call 973-341-3080 and use PIN #2449766. The next call is 7 am CDT this Thursday, when May sales figures will be released. To participate, call 973-628-6885.
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FRANK'S: HOPEFUL SIGNSFor the quarter ended May 20, sales at Frank's were $153.1 million, compared to $166.9 million a year ago, excluding 44 stores that closed at the end of the year but including 24 stores that were to close last month. Total sales from the 196 stores that will continue to operate were $143.2 million, up 4.2%. Same-store sales rose 1.4% for the quarter and 7.8% for April and May. Frank's filed for Chapter 11 protection in February."We are pleased with our current performance," stated Chair/CEO Joseph Baczko, "given that the first two months of this quarter were preoccupied with our Chapter 11 filing made February 19, and immediately thereafter on restoring vendor shipments to obtain inventory for our spring season. "While the first quarter has proved to be a very competitive and promotional period, thanks to the continuing support of our many vendors and the efforts of all of our associates, we are essentially on plan in terms of our spring merchandise assortments and inventory levels. We are also pleased that, as a result of strong sales in the last two months, our working capital borrowings at the end of the first quarter were down to approximately $19 million against an existing line of credit of $100 million."
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SPRING QUILT SHOW REPORT, PT. IThe following is from Karen Ancona, Editor of CNA magazine:Athough Atlantic City is not a bright spot along the New Jersey Shore in May, Quilt Market created its own excitement and warmth. We talked to shop owners who had traveled from California and Atlanta who reminded us that it was the "small vendors" they were there to visit, not the beaches and casinos. They were not disappointed. Two surprises for attendees: 1. Pebeo's exhibit (yes, a paint company) drew lots of attention for its excellent use of watercolor paints to "reverse print" on fabric. The sun coloring technique opens opportunities for those who wish to "dye" their own fabrics. 2. Petal Play by Joan Shay caught the eye of sharp buyers. The technique is not unlike the old Pretty Petals that was popular in the early 80's, but it's much, much easier. Crafters, quilters, and sewers will enjoy the revived use of fabric to create layered flowers that can be worn alone as jewelry or used as dimensional embellishment to quilts and more. Shay called the technique Appli-bond and has written two books on her subject. CNA editors coined a word for their favorite new look: Assemble. Quilter's Resource brought the technique to Atlantic City from Australia. It involves layering trims, beads, ribbons, sheer fabrics, and laces over silk screened antique prints. It's embellishment at its best and involves dying laces, ribbon embroidery, and more. Watch for more on this topic. The new techniques in no way overshadowed the traditional exhibitors.. Distributors were mobbed as were fabric companies. Colors are rich, and we're seeing a lot of reds and golds, and/or black and gold. Both combinations have an Asian look. And in contrast to the Pacific rim influence, the pinks and blues of the 50's poodle skirts were in almost every fabric booth as were vintage greens and pinks. The best word to describe the show -- abundance. There was something there for every imaginative buyer. We believe Quilt Market leads the craft industry in color and technique.
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SPRING QUILT SHOW, PT. IIThis report is from a long-time attendee at Quilt Market, industry consultant Ellie Joos:The overall mood was positive. If I heard it once, I heard it a dozen times, "It was better than we expected". Apparently, many exhibitors came to the show with no expectations, comparing it to the Providence show several years ago. Consequently, they were very pleased with the new East coast contacts, buyers they met at this show. Of course there were the usual complaints -- hotel prices, getting there from Philadelphia or Newark, unions, etc. Trends I saw: Colors -- shades of browns continue, browns and reds together, red work, blues and greens together. P&B Textiles' booth very refreshing -- stained glass look interpreted in fabric. New products: loved the sliding stencil from EZ Quilting, back to basics templates from Come Quilt with Me, and a gorgeous new magazine, Quilting Arts, self-published by Patricia Chatham Bolton, who until last year was a special education teacher and decided to follow her dream. Also, it wasn't new but I love it: printed interfacing from Quilt Smart and mosaic quilt patterns from Shannon Williams. Omnigrid's booth looked fabulous, tied in to gambling theme. Donna Wilder's new company, Free Spirit, had a very good show and her fabric line, aimed at independents, is wonderful. One person I spoke with said the "trends were in what wasn't here" -- very little soft sculpture and only one doll pattern company (beautiful patterns from Barbara Willis Designs). Note: Ellie Joos is an industry consultant specializing in public relations, TV representation, and product and packaging development. She will be appearing on the Home Shopping Network June 7th to promote her book, The Splendor of Ribbon. She can be reached at eleapple@hotmail.com. or call 908-459-9269.
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STATIONERY SHOW REPORTProducers of the 55th National Stationery Show in New York expected 18,000 buyers, but reports from exhibitors related to our industry weren't particularly positive. Many felt the traffic was down. There were fewer scrapbook and stamping exhibitors, but, of course, lots of paper vendors among the total of approximately 1,400 exhibitors.Still, craft industry-related products continued to play a pervasive role in the show. Two of the major trends cited by show sponsors: 1. "Handmade Products" including (craft-related) products used to make items, including frames, scrapbook embellishments, and greeting cards. 2. "Activity Kits" for adults and kids, including scrapbook materials. The show is divided into five major areas with most of the exhibitors related to our industry in the "Presents" section (scrapbooks, stickers, rubber stamps, craft supplies, and kids products). Some ribbon/trim companies exhibited in the "Celebrate" section, while some pen, card-making, and paper exhibitors were in the "Indulgences" section. "Several vendors mentioned that the purpose of the show was more of a marketing tool -- getting (and keeping) their name out in the market, instead of focusing on writing orders," one observer told us. "Primarily sales are done prior to the show or following the show with major/key accounts."
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PAINT SHOW A QUALIFIED SUCCESSAttendees at the Society of Decorative Painters convention/show were pleased with the Reno facilities. Good strong show -- 2,132 registered and about 2,300 walk-ins. The crowd was further evidence that the tole shops are in serious decline, but that was offset by very strong contingents from Asia, South America, France, and England.Acrylics remain the dominant paint of choice, but the Genesis line of heat-setting paint was a big hit. "As to trends at the show," one SDP pioneer told us, "I didn't see too much that was too exciting. Roosters and chickens are still strong; gardens and the natural look are still strong, even snowmen are hanging in there and not melting away. But really, nothing very new. But I was working and didn't get a chance to study the show in depth." "The convention was good," she continued, " but I feel about 40 exhibitors short -- and I'm including myself in that number. I canceled our booth because I felt it was just too many shows in Nevada. The attendance was good, and sales were good on Thursday and Friday. It was downhill from there."
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SHRINKAGE HURTS JO-ANN'S RESULTSThere was a net loss for the quarter of $6.4 million ($0.35/diluted share), which includes non- operating, after-tax charges totaling $1.1 million ($0.06/share). Net sales increased 1.1% to $328.9 million, but same-store sales decreased 2.0%. The non-operating charges related to the company's new financing (reported in a previous issue).Excluding the one-time charges, the operating loss was $1.5 million compared with a profit of $11.8 million a year ago. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $8.2 million, or 2.5% of sales, versus $20.7 million, or 6.4% of sales, a year ago. Physical inventory at 36% of the stores revealed higher shrinkage rates than usual or anticipated, officials reported. Shrink expense was $4.3 million worse, on an after-tax basis, than the company's historical shrink rates. The impact on first quarter results related both to stores actually inventoried and to an increased shrink accrual required on uninventoried stores. Officials say they are pursuing remedies. (The above paragraph is "accountant-ese" for a higher than usual amount of goods stolen from the inventoried stores, and prorated over the entire chain.) If current shrink trends for stores inventoried in the first quarter continue through the remainder of the year, results for the year could be negatively impacted by $9 to $10 million after-tax, officials said. Officials added that the "SKU Reduction Initiative" ($60 million worth of merchandise at a zero gross margin rate) has begun. Chair/CEO Alan Rosskamm said, "... we expected a difficult start to this year and anticipated that our results would trend unfavorably to the prior year for the first three quarters." "I am pleased with all of the good things we are accomplishing internally," Rosskamm added, "and I remain confident in our turnaround plan. However, as we have communicated previously, these efforts will not translate into improved operating performance until the fourth quarter of this year.". Management estimates net losses for the year will be $0.60 to $0.70/share. Things will get worse the second and third quarters, then improve in fourth. However, officials warned that non-recurring charges associated with additional store closings and other turnaround initiatives, could increase the losses for the year. During the quarter, the company opened 3 etc superstores, relocated 6 traditional stores, and closed 19 smaller or underperforming traditional stores. The store count is now 930 traditional stores and 61 etc superstores. The company continues the strategy of replacing a number of traditional stores with fewer but larger superstores. The result is a lower overall number of stores (991 from 1,027 a year ago), but more square footage (16.04 million, compared to 15.85 million). Note: The 13th annual Retail Theft Survey, conducted by Jack L. Hayes Int., a consulting firm, reported that 30 U.S. retail companies responding to the survey lost more than $4 billion to shoplifting and employee theft in 2000, the seventh year in a row the number has increased. Survey participants caught 73,326 dishonest employees in 2000, a 10% increase, Chain Store Age reported.
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PRICES GOING UP?Inflation may soon be rearing its ugly head in our industry. Consider:1. Because of high fuel costs, trucking companies and delivery services (UPS, FedEx) are raising prices. 2. Health insurance costs are sky-rocketing. Annual increases of 30% are not uncommon. 3. Many vendors have been hit with huge price increases for raw materials. 4. Electricity costs are soaring in the West, with other areas, no doubt, soon to follow. In recent years some retailers have sent letters to vendors saying they refuse to accept any price increases. Then it was possible for many vendors to comply. Now .....?
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DMC'S STATE OF THE ART WEBSITEDMC launched a complete redesign of its consumer website at dmc-usa.com. Launched in 1996, the site has averaged 2.5+ million hits/month, but "Recent research indicated that our consumer's needs have changed, and this site redesign enables us to meet those changing needs," said DMC's CEO Peter Acerra."This redesign reflects our two-pronged marketing strategy," Acerra added, " to grow the needlecraft category by offering new products and diverse projects to keep existing consumers interested, while providing easy step-by-step directions and projects that appeal to new consumers." New technology developed since 1996 was used for various features, including: Project Central provides free projects than can be downloaded and printed ... Project Search which allows users to find a project by the type of craft, completion time, and the skill level ... Message Center (with a search feature) is a forum for posting and answering questions ... The Needlework Directory is an upgraded "Links" section with a feature allowing users to rate sites ... An Event Calendar for users to post needlework and craft events in their area ... Beginner's Corner provides basic needlework info ... Activities with Kids ... A free email newsletter.
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RANDOM NOTES, RANDOM THOUGHTS1. I will be out of the office on vacation from June 5th through the 15th. Fax: 309-925-9068, call and leave a message at 309-925-5593 or email mike@clnonline.com. I will not be checking in (hey, it's vacation, remember?) but will respond as soon as I return. If you have any technical problems, please call Brett King at 815-877-7975 or email bking@knetsolutions.net.2. Email from a vendor: "Thought you might be interested in some major buyer' talk outside our industry (buyers from stores such as Target, K-Mart, Linens 'n Things, etc.) that I heard at a meeting this week: certain products and crafts in general are a developing category.' This follows on the heels of the announcement that Target is testing selling craft magazines. Hmmmm. Smells like an opportunity here. It's for these reasons we need an accurate Size of the Industry study -- to convince these outside industry' buyers that, indeed, crafts is a burgeoning category -- especially with all the boomers retiring with increased time on their hands." 3. Karen Ancona's column in the June issue of CNA highlights a dilemma for the publishers of our consumer magazines -- and an opportunity for our retailers. Just as our industry's retailers have consolidated into fewer but larger and stronger businesses, so have magazine distributors, those folks who take the magazines from the printer to the newsstands. They are becoming far more demanding, and refusing to distribute titles that aren't comparatively huge sellers. People magazine will remain on the newsstands; some small magazines aimed at quilters, power boat enthusiasts, coin collectors, painters, etc., may not. The demand will still be there, but there may be fewer outlets selling craft, sewing, quilting, painting, stamping, and scrapbook magazines. It could be time for our retailers to consider expanding the number of magazines they sell in their stores. Many of the publishers offer no-risk sales; in other words, retailers pay for only the copies they sell. There may be more profit potential in magazines than ever before.
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MISCELLANEOUS NEWSMAY. Hancock's May sales declined 2% to $25.7 million. CEO Larry Kirk said, "... comparable sales were little more than flat with a year ago in the May period. Continued consumer caution in general and deep discounting in our industry in particular made sales gains more difficult without compromising gross margins and pricing credibility. Although Memorial Day was exceptionally strong to start the June period, we continue to believe conditions could be choppy in the near term in this highly promotional environment."PENDING. Prym-Dritz is in negotiations to purchase Dal-Craft, Inc. (LoRan Products). Due diligence is proceeding. CONSUMERS. ACCI and Craftrends are sponsoring focus groups at the ACCI show July 20-23. Exhibitiors can submit their products to be evaluated by one of three groups of consumers who will discuss the products at a moderated forum open to all show attendees. The groups will be "tweens," females ages 25-54, and crafters who are 55+. Participation is limited. Exhibitors wishing to submit their products should call at 740-/452-4541 as soon as possible. SHOPLIFTING. A woman detained for shoplifting by security guards at a Wal-Mart in Rockford, Ill. pulled a gun from her pants and shot three people before being shot dead by police. At last word the store's assistant manager was in hospital in fair condition. PAINT. Interesting article in the Union News, a major newspaper for northern Mass., about the growing renewed interest in paint-by-numbers. The article cites an art gallery that sells finished projects and says the Michaels store in West Springfield has expanded its paint-by-number offerings. The category was created in 1949 by a Dan Robbins, who is now a free-lance artist in Oak Brook, Ill. Robbins was working for Palmer Paint and the original line was called Craft Master. To read the article, go here . WORKERS. About 20 Wal-Mart workers, wearing their trademark blue vests, briefly went through a Bloomington, Illinois Kmart handing out leaflets advertising openings for cashiers at the Wal-Mart store across town, the Associated Press reported. The Kmart manager threw them out of the store. The Bloomington unemployment rate is 2.5%, the lowest in the state. CLOSING. Industry veterans Jim Ross and Bill Pacquette are closing their Portland-area store, Craftmart. QUILTING. The 11th series of Quilting From The Heartland uplinks July 29th to PBS Stations. This series, "Nestled in the Country" is hosted by Sharlene Jorgenson. A companion book and the series on videotape will be available. Call 800-637-2541 for info, and your local PBS station to carry the series. DIRECTORY. HIA recently added a new Manufacturing Processes Directory to the member level of hobby.org. It's a searchable index of HIA members who offer manufacturing operations (die-cutting, plastic extruding, embossing, printing, etc.) for sale to other companies. Have a process service you'd like to add to the Directory? You can complete and submit the form online. LOOKING FOR EMPLOYMENT. Industry veteran Jackie George can be reached at 310-548-9065 or e-mail jackiegeorge36@hotmail.com. AWARD. Multi-Ply Wood Design was honored as a winner of the Export Achievement award for innovation and growth, presented by the New Brunswick (Canada) Minister of Investment and Exports. The company produces wood products. For more info, call 506-454-4430; email info@multi-ply.com; fax 506-455-6242; or visit multi-ply.com. SEWING. Movie star Nicole Kidman is the subject of an article in the current issue of In Style magazine -- and tells the writer that she sews. HIA. The Nominating Committee is accepting nominations for candidates to HIA's Board of Directors. To nominate someone, complete and submit the form in the summer issue of Horizons by Aug. 1. Forms can also be requested from committee chair Tom Ware (Bagworks) at tware@bagworks.com, or from HIA Exec. Director Patricia Koziol at pkoziol@hobby.org EXPANSION. Gerson's new three-floor, 40,000 sq. ft. facility should be completed for move-in by mid-August. It's in Olathe, Kansas, a suburb of Kansas City. Each division will have its own showroom, with the International division having the largest, 13,500 sq. ft. PEOPLE. Craft House promoted Chris Pavain to Exec. VP, Rob Vandorselaer to Sales VP, and Karen Thompson to Marketing Manager. RATING. Lehman Brothers reiterated coverage of Wal-Mart at Strong Buy ... Merrill Lynch initiated coverage of Michaels at Near-term Accumulate/Long-term Buy. ZANY BRAINY. In its annual report the company said it "may never re-launch zanybrainy.com" unless it can attract more resources to support it. The e-commerce function of the site was removed on May 8. The site has lost $11.5 million since its launch in October, 1999.
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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*: 11.70 ... Change**: -0.40Ames (AMES). Last*: 2.53 ... Change**: -0.16 Hancock Fabrics (HKF). Last*: 9.11 ... Change**: +0.57 Jo-Ann Stores (JAS.A) [a]. Last*: 4.39 ... Change**: +0.09 Michaels (MIKE). Last*: 39.55 ... Change**: +3.10 Rag Shops (RAGS). Last*: 2.60 ... Change**: +0.10 Wal-Mart (WMT). Last*: 51.72 ... Change**: -0.32 CLN Retail Index. Last*: 100.501 ... Change**: +2.5% Dow Jones Index. Last*: 10,990.40 ... Change**: -2.8% *June 1 ** from May 18 [a] voting share Note: Prices are exclusive of dividends
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YOU THINK A GALLON OF GAS IS EXPENSIVE?Diet Snapple: 16oz., $1.29 ... $10.32 per gallonLipton Ice Tea: 16oz., $1.19 ... $9.52 per gallon Gatorade: 20oz., $1.59 ... $10.17 per gallon Ocean Spray: 16oz., $1.25 ... $10 .00 per gallon Vick's Nyquil: 6oz., $8.35 ... $178.13 per gallon Pepto Bismol: 4oz., $3.85 ... $123.20 per gallon Whiteout: 7oz., $1.39 ... $25.42 per gallon Scope: 1.5oz., $0.99 ... $84.48 per gallon Evian water: 9oz., $1.49 ... $21.19 per gallon Squeeze bottle of acrylic paint: 2oz., $0.99 ... $21.68 per gallon
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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 18th.
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