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Creative Leisure News
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July 16, 2001 TABLE OF CONTENTSCOMMENTARY: FLAT SALES AND HISTORYThis issue of Creative Leisure News includes a special report on the state of the industry at mid-year. It's not very positive. Industry sales seem to have flattened, but history tells us that's no reason to panic.Industry sales shoot up when a hot trend hits. It was true with macrame, cross stitch, dollmaking, fabric painting, and recently with scrapbooking and stamping. Then sales level off -- at a substantially higher level than they had been before the trend. But we get spoiled by growth and begin to complain that sales are flat. Keep in mind, we're in a $10-$11 billion industry. Flat or not, that's large enough for anyone reading this to be successful. Years ago Mike McCooey, the president of Plaid, said, "I love this industry because you're always only one good idea away from a great year." That's still true.
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THE INDUSTRY AT MID-YEAR, IIn January Michaels' CEO, Michael Rouleau, described the industry's sales as "flat." Things don't seem to have changed much since then.The evidence seems clear. The June retail sales figures were lousy (see article below). Reports from recent trade shows have been mixed, at best. That's evidence of buyers' cautious attitudes, which usually stem from mediocre sales in the stores back home. One major vendor, who sells a wide range of products to chains and independents, said, "In general, the crafts business IS NOT GOOD. I don't care what anyone says; when you talk directly with the retailer, independents as well as chain managers, the reports are not positive." The retail blahs have affected suppliers. Some have laid off employees; others have closed their doors, declared bankruptcy, or sold off major product lines. Vendors having a good year are doing so by increasing market share. What's the problem? Is it a declining interest in our products, the slow-down in the economy, or retailers' internal problems? Probably some of each. Internal problems. Jo-Ann's and Ames are not selling and re-ordering craft and sewing supplies as well as many vendors would like, but it's not due to lack of consumer interest. Jo-Ann's computer problems have been extensive, and adding a new warehouse thousands of miles away always causes temporary snafus. These problems appear to be on the way to being solved, but in the meantime, Jo-Ann's is clearing out $60 million worth of close-outs. Those clearance sales probably hurt competitors sales, at least slightly. Ames has experienced problems almost from the day it acquired the Hill's chain. The company refinanced its debt in March, then borrowed another $75 million earlier this month. As a former Ames buyer told us, the Hill's customers were accustomed to an everyday-low-price philosophy, rather than a frequent "on sale" strategy, and they've balked at the change. Today 31 of the acquired Hills stores have been closed -- after having been remodeled and re-opened as Ames stores. Wall Street has noticed. By mid-1999, the stock almost hit $50/share; now it's trading around $1.30. The economy. The industry thought the faltering economy would boost sales, as worried consumers saved money by making household decorations, jewelry, and apparel rather than buying readymades. That hasn't happened. The economy hasn't (yet) slumped badly enough to test the "recession is good" theory. Consumer confidence has remained relatively strong, gas prices have actually declined, and now millions of consumers will have tax rebates. Declining consumer interest. I have been writing about industry trade shows for 22+ years, and I've never heard so many reports of shows being "boring" as I have this year. If the product array at our trade shows is boring us, how must the consumer feel?
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THE INDUSTRY AT MID-YEAR, IIMichaels seems to be doing fine, but year-to-date same-store sales increases of 2% probably aren't as high as officials had hoped.Wal-Mart doesn't reveal its specific craft and sewing sales figures, but its continuing attempts to reduce SKU's (which it probably does in every category) makes vendors nervous. Hobby Lobby, a privately held company, doesn't reveal specific sales figures. It appears to be doing well, but more and more of its products are self-made and/or self-imported, so its success does not boost other businesses as much as a chain that buys all its inventory from industry suppliers. Hancock is also doing well (its stock certainly is), but its emphasis on more home dec items means its success, like Hobby Lobby's, doesn't help as many industry vendors. Year-to-date profits are up, but same-store sales have risen only 1.4%. A.C. Moore's numbers tell the story -- second quarter same-store sales rose a good 4%. Profits should be okay, despite the price competition from area Michaels stores. Independents. It's impossible to generalize, but as one shopowner wrote, "It's hard to remain positive when all around you, Ames, Jo-Ann's, and Zany Brainy are all having bad times. If these companies are having trouble, how do we small people survive? We have had to tighten our belts. We buy less and find new ways to use those basics, paints, and floss. Stick with the basics when things are down and it will be easier to get through them!"
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MID-YEAR PREDICTIONSEconomists are predicting the national economy will grow about 2% in the second half of 2001. What that means for our industry is anyone's guess. But here are some guesstimates:Michaels, A.C. Moore, Hobby Lobby, and Hancock will do fine. Not great, but ok. Wal-Mart may continue to condense its craft/sewing areas, but it will not drop them. Jo-Ann's will continue to have problems through the third quarter, but business should improve in the fourth quarter. Ames claims it has made internal improvements which will eventually pay off; we'll just have to wait and see. Independents who have survived the past five years will survive this bump in the road. Consolidation at the vendor level will continue. As long as getting new products into the pipeline continues to be so difficult, more companies will try to expand through acquisition. The trend of vendors paying more attention to independents will continue, too, as suppliers remain worried about having so much business in the hands of so few buyers. There does not appear to be any new trend on the near horizon that will be a new "rising tide that lifts all boats." Until that happens, the industry needs to hunker down and control costs. Vendors need to work on new product development, and retailers need to be more willing to give those new products a chance.
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SALES SLUMP IN JUNEMichaels same-store sales dropped 1% in June, the first negative sales report in recent memory. Jo-Ann's same store sales rose 7.3%, but officials warned the strong increase was due in part to its "SKU Reduction Initiative" (close-out sales) "which is expected to have a positive impact on top-line sales performance, but negatively impact realized gross margin rate."Ames' same-store sales dropped 4.8% and overall sales, due to store closings, fell 5.4%. Chair/CEO Joseph Ettore blamed the slowing economy and waning consumer confidence. Meanwhile Janus, the huge mutual fund company, has sold more than 2.2 million shares of Ames stock since February, cutting its stake in the retailer from 12% to 0.9%. Hancock's same-store sales increased 3.4% in June. They're up 2% for the first two months of the quarter, and 1.4% year-to-date. A sampling of other retailers' same-store performance in June: Wal-Mart, +6.8% ... Target, +3.2% ... Kmart, +1.1% ... ShopKo, -2.6% ... Pamida, -3.9%.
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EXPENSES HURT RAG SHOPS' BOTTOM LINESales for the third quarter rose to $23.7 million from $22.7 million; same-store sales rose 1.0%. For 9 months, sales are up to $79.5 million from $77.4 million and same-store sales rose 2.4%.However, net income for quarter was $46,000 ($.01/diluted share) compared to $250,000 ($.05) a year ago. Income before cumulative effect of change in accounting principle for the nine months was $1,372,000 ($.29), versus $1,748,000 ($.36) in the comparable period last year. Officials said the decrease for both the quarter and nine months was due to rising store expenses, principally attributable to new store openings and operating a secondary distribution center for an additional two months for the quarter. During the quarter the company opened one new store, bringing the store count to 66. In the next quarter officials expect to open one new store and to close one existing store. Officials say they have completed the development of a new prototype store which should open this fall.
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A.C. MOORE KEEPS ROLLINGA.C. Moore reported sales of $67.1 million for the second quarter ended June 30, 2001, an increase of 22%. Same-store sales rose 4%. For six months sales rose 24% to $133.5 million and same-store sales grew 4%.CEO Jack Parker said, "This result keeps us well positioned to meet or exceed the earnings guidance we previously provided." Second quarter earnings will be released on July 19 and the company will host a conference call at 9 am EDT.You can listen to the call over the Internet through Vcall at http://www.vcall.com. The current store count is 55.
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ZANY BRAINY TO EMERGE FROM CHPT. 11Unsecured creditors (i.e., vendors) of Zany Brainy can expect to receive 15-20 cents on the dollar under the terms of an agreement to sell the ZB assets to Waterton Management, a private Los Angeles investment firm. The unsecured creditors committee have approved the plan, but payments are contingent on ZB meeting unspecified sales targets prior to closing.As part of the agreement, Waterton will fund approximately $115 million which ZB will use to reorganize its business operations and eventually emerge from bankruptcy. ZB had filed for Chapter 11 protection in mid-May, with liabilities of $131 million and assets of $201 million. The deal requires bankruptcy court approval, which is expected at a hearing August 10. No store closings or layoffs are planned, and the headquarters will remain in King of Prussia, Pa. Zany Brainy currently operates 187 stores in 34 states.
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MORE ACCI NEW PRODUCTSBLUMENTHAL/LANSING. (#1117-8,1217-8) The Craft & Promotional Concepts division will unveil Zip Clips, a 38-piece collection of pewter zippers; Victorian Bookmarks, a 12-piece assortment of 100% rayon venise bookmarks; and Organza Gift Bags, 100% nylon bags with satin ribbon pulls in 4 basic sizes and one custom size, in 18 colors.C-THRU RULER. (#3002). Unveiling a new open-stock and kit scrapbook line, Time & Again, plus new Better Letter coordinating sticker letters and stencils, a new cutting mat, and a 10% discount on retailer show orders. DESIGN ORIGINALS. (#1415-1418) Is introducing books to make 70 new clay characters. Photos and instructions show the crafter how to create miniature faces, arms, legs, clothing, and accessories for holiday characters, toy soldiers, professional people, clowns, a bride and groom, etc. ... There are also new books on soapmaking, metalwork, beaded flowers, "candlescaping" and "stampart", ribbon art, etc. ELLISON. (#4032) Offering a 15% discount on all show orders. HSI MANUFACTURING. (#1911-12) There's an extended line of Tapestry Needlecraft Organizers that includes knitting stands, bedside caddies, arm-chair caddies, knitting and crochet needle organizers, and yarn bags. There are also separate lines of stitch-your-own Aida and paint-your-own canvas kitchen accessories that include chef hats, oven mitts, pot holders, bread basket liners, bread basket covers, tablerunners, and chefs' aprons. IMAGE HILL. (#6411-6412) New packaged candle making line by Country Lane will be exhibited for the first time with new ideas in gel candlemaking. And the Soap Expressions line will be expanded to include a line of "Bath & Body" luxuries. Visit www.imagehill.net and www.soapexpressions.com. KOLE IMPORTS. (#8508-9) Offering craft accessories and educational aids. KRAUSE PUBLICATIONS. Will be demonstrating the new, greatly improved website for CNA, Arts & Crafts, Craft Supply Magazine, and other periodicals. LEISURE ARTS. The Cottage Collection is 11 cross stitch kits with miniature replicas of screen doors and window frames with a mesh spaced similar to Aida that the customer stitches on directly ... Palette Publications is a series of leaflets for painters ... The Nature Collection is a series of 12 cross-stitch kits of nature designs with all the necessary supplies ... Pooh and Friends in Crochet is also new, and coming soon will be Winnie the Pooh publications for quilting. MOUNTAIN MIST. (#2918) White Gold Iron-Baste 100% Cotton Batting joins Gold-Fuse Baste Free Fusible 50/50 Cotton Polyester Batting --- no pin or thread basting, no basting spray necessary --- to prepare for quilting, simply steam iron layers together. PAPER CREATIONS. (#4828-31) Offering "Quilt-a-Card" handcrafted card kits, papers, die cuts, cards, and envelopes. POLYFORM. (#1214) Will debut Premo! Sculpey 8-piece "Artpacks" in two color families, neutrals and primaries. The "Artpacks" have 8 two-ounce bars of Premo! Sculpey plus three clay tools and an instruction booklet featuring rubber stamping into clay, designed by Kris Richards, a prominent polymer clay and stamping artist. SIZZIX. (#4038) A new product line from Ellison and Provo Craft. STENCIL EASE. (#1402-3) There are two new complete mural collections and 75+ new patterns. There are new theme stencils for power panel promotions, and a "Sign Language Alphabet Stencil" which is being given free to deaf organizations to help teach children to sign. WALLIES. (#3304) Is introducing at least 20 new "wallpaper cutouts" designs, many with coordinating borders. Suzy Zoo and Babar licensed designs are also available.
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A HEAD START ON ACCI, PT. III(This is the third in a series of listings of first-time ACCI exhibitors who have websites, so you can check the sites to see if you wish to visit the show booths. To learn about the sites of other new exhibitors, click on "CLN Archives" to read the previous two issues.)Aloha Memories ... alohamemories.com ... Island scrapbook paper designs Arkwork ... arkworkkinds.com ... Art papers and info, retail and wholesale Aroma Trading ... aromatrading.co.uk ... Scents for candlemaking, etc. A.W. Cute Stickers n' Stuff ... awcute.com ... Stickers, papers, calendars, stamps Carole's Stencils ... carolesboxes.com Stencils and old-world boxes Casting Kits by The Madison Group ... castingkits.com ... Kits for Christian themed gifts CerTek Software Designs ... certek-software.com ... POS software for retailers Collected Memories ... collectedmemories.com ... Scrapbook catalog, diecuts, etc. Curiosity Kits ... curiositykits.com ... Craft kits for kids Dayco ... daycodiecuts.com ... Scrapbook diecuts Destination Stickers & Stamps ... journeystamps.com ... Rubber stamps, stickers Edible Masterpiece ... ediblemasterpiece.com ... Cake decorating supplies Emagination Crafts ... emaginationcrafts.com ... Scrapbook supplies Greetings Etc. ... greetingsmagazine.com ... Trade magazine for greeting cards/stationery Heart & Home ... heartandhome.com ... Primitive country home d‚c items Hooked on Rugs ... hookedonrugs.com ... Rug hooking kits, diaper bags, baby supply kits Illumicraft Div. of Craftexpress ... craftexpress.com ... Candle- and soap-making supplies Innovo ... innovogroup.com ... Wide range of bags, organizers Mode Int'l. ... modebeads.com ... Importer of glass beads, etc., from the Czech republic Pages In A Snap by Two Busy Moms ... pagesinasnap.com ... Scrapbook supplies The Pillaged Village ... pillagedvillage.com ... Catalogs offering pre-17th century European garb and trim from the Society of Creative Anachronism Quilt Central ... quiltcentral.net ... Catalog available onsite Roto Zip Tool ... rotozip.com ... Rotozip racing car kits and apparel The Sassy Frog Scrapbook Co. ... sassyfrog.com ... Scrapbook supplies, papers, stickers Scrapbook Necessities ... scrapbooknecessities.com ... Scrapbook supplies Scrap Pagerz.com ... scrappagerz.com ... Alphabet templates and fonts for scrapbooks Spot Merchandising ... spotmerchandising.com ... "Flip pocket" die-cut merchandising displays Suzy's Zoo ... suzyszoo.com ... Greeting cards and stationery Tidy Crafts ... tidycrafts.com ... Organizers for hobbies, crafts, and office supplies Tumblebeasts ... tumblebeasts.com ... Stickers, papers WillowBead ... willowbead.com ... Beading supplies
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RANDOM NOTES, RANDOM THOUGHTS1. I received a note from a floral exhibitor at the SILK show:"Florals is a changed business for sure. Twenty years ago you went to any trade show with florals and there were the 8 or 10 big companies, and they had the business. "Then it seems the Chinese "family connection" took hold and the brother in China ran the factory and the other brother and relatives came to America, opened a warehouse on the West Coast, took off across country selling from a set of samples, booked big orders and sent them to the Orient, where they were produced, shipped and delivered. Then the whole thing started over again. The next step was to start warehousing some backup for reorders. "Now when you go to a show, there are the same 8 or 10 big companies, but also at least 100 others of various sizes, shapes, etc. "How does the customer know where to shop? It has been an amazing change." 2. I'm finally breaking down and exhibiting at the ACCI show, where my wife, Barbara, will be giving away free copies of this issue. (God bless relatives; they work cheap.) Stop by #7818 and say hi to her -- I'll be roaming the aisles looking for news to report in future issues and in CNA magazine.
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MISCELLANEOUS NEWSACCI. The show will be about the size of last year's show (number of booths and exhibitors) with an increase in attendance, based on pre-registration figures. If you haven't bought class and/or event tickets, do so as soon as you arrive at the show -- 23 classes are sold out and 12 others are at 90% capacity.PEOPLE. Jo-Ann's hired former Rag Shops exec Michael Aaronson as Regional VP for the Northeast ... Hancock Fabrics named James Austin to the new position of Exec. VP/Operations, reporting to President/CEO Jack Busby, Jr. Austin has overall responsibility for merchandising, marketing, operations, and distribution. Austin held management positions at Wards, Tuesday Morning, and Waccamaw ... Cal Gauss was promoted to President/COO of Conso Int. Corp. He had been President of Wm. Wright until Conso purchased Wrights. Conso is comprised of Conso Products, Simplicity Pattern, Wm. Wright, and other divisions. COPYRIGHTS. We've reported extensively on the problem of people posting copyrighted designs and projects on the Internet for the world to copy. Leading the industry effort to fight the problem is Jim Hedgepath of Pegasus Originals. He writes: "Things right now are as bad or worse than ever, but I am aware of lawsuits against individual offenders that will break soon." An ad hoc committee will meet at the INRG show in Charlotte and we'll keep you up to date on the committee's future plans. WAL-MART. The July 16th edition of Business Week details the anti-Wal-Mart lawsuits we described in our last issue. Most of the article detailed the enormity of the sex discrimination suit if it becomes a class-action case. The article also discussed a disability lawsuit in which a Texas judge fined the company $750,200. Business Week added, "Indeed, since 1994, the EEOC has filed 16 suits against Wal-Mart for disability discrimination. That is the most Americans with Disabilities Act-related EEOC suits of any U.S. company, according to the EEOC." REPS WANTED. The Beadery is looking for independent sales representatives in many key regions across the U.S. Reps interested in applying should send a resume and list of current lines to The Beadery, attn: Steve Lord, P.O. Box 178, Hope Valley, RI 02382; fax 401-539-2598, or stop by the booth (#1304) at the ACCI show. ONLINE. Because of the strength of its online sales, Accu-Cut's CJ Wilson has been re-assigned from National Sales Manager to International Sales Coordinator and former regional sales managers Cheryl Darrow and Debra Jennis will pursue a formalized program for educating retailers and consumers about Accu-Cut products. Retailers can place orders online at www.accu-cut.com, or by phone, fax, e-mail, conventional mail, or at trade shows. PEOPLE. Former Michaels President John Martin was hired as President/CEO of Illuminations, a 75-outlet chain of candle stores. "John Martin's successes at OfficeMax and Michaels have demonstrated his solid leadership ability," board chair Wally Arnold told Gifts & Decorative Accessories magazine. WOOD. Walnut Hollow is now the exclusive U.S. distributor for Multi-Ply Wood Design's Memory Plates and Home Plates and will have them at the ACCI booth #602. MARTHA. Kmart will roll out two new Martha Stewart categories -- crafts and holidays -- "within seasonal formats" for 2002, a press release said. What this means for the industry remains to be seen. Martha often uses "crafts" differently on her tv series and mail order catalog than we use it in the industry. TNNA. Show Schedule: Aug. 26-27, Phoenix ... Jan. 12-14, 2002, San Diego ... March 17-18, Philadelphia ... June 8-10, Columbus. Write to PO Box 3388, Zanesville, OH 43702-3388; phone 740-455-6773 or 800-889-8662; fax 740-452-2552; email tnna.info@offinger.com visit tnna.org. TV. We reported in our last issue that Craft Home & Style, the new tv series, would premieres August 3rd on the Hallmark channel (formerly the Odyssey Network). Set your VCR's, though, because debuts at 6 am EDT ... Host Tiffany Windsor will appear on Woman2Woman (CBS, Los Angeles) on July 30, talking about kids' crafting ideas.
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ARE WE HAPPY YET? STILL?(Note: In our last issue, we wrote about a long-time industry vendor who said the industry wasn't as much fun as it used to be. The following is a response from Bob Ferguson, a veteran independent retailer in Redmond, Washington.)I am not so sure I agree with your industry veteran who says that the creative industries are now less enjoyable. We are having as much fun, but its differently. For many years, as our industry was maturing, (god forbid that we should ever really grow up), we used many of the same techniques applied to the universal retail model. Stack out a product, give it an attractive price, hope the consumer recognized the goods and the value, and watch it sell. It worked for a time as there was nothing else for the consumer to compare with. We ran that string out in the mid 90's and then started to bore the consumer with the same old, same old. We had to become much more innovative in our product selections, our presentations, and our modeling and selling techniques. Since when is creativity and innovation not fun? Like any business or job, it is what we make it, and if we make it fun for our staff and they make it fun for the consumer, we will always have an interested consumer for our base of business.
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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*: 15.50 ... Change**: +0.50Ames (AMES). Last*: 1.27 ... Change**: -0.12 Hancock Fabrics (HKF). Last*: 10.54 ... Change**: +1.59 Jo-Ann Stores (JAS.A) [a]. Last*: 4.50 ... Change**: +0.45 Michaels (MIKE). Last*: 39.76 ... Change**: -1.24 Rag Shops (RAGS). Last*: 2.65 ... Change**: -0.10 Wal-Mart (WMT). Last*: 52.90 ... Change**: +4.10 CLN Retail Index. Last*: 127.12 ... Change**: +4.2% Dow Jones Index. Last*: 10,539.00 ... Change**: +0.3% *July 13 ** from June 29 [a] voting share Note: Prices are exclusive of dividends
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POLITICS EXPLAINED BY TWO COWSSocialism: You have two cows. You keep one and give one to your neighbor.Communism: You have two cows. The government takes both and give you milk. Fascism: You have two cows. The government takes them and sells you the milk. Bureaucracy: You have two cows. The government takes them both, shoots one, milks the other, pays you for the milk, and then pours it down the drain. Capitalism: You have two cows. You sell one and buy a bull. Corporate: You have two cows. You sell one, force the other to produce the milk of four cows, and then act surprised when it drops dead. Democracy: You have two cows. The government taxes you to the point that you must sell them both in order to support a man in a foreign country who has only one cow which was a gift from your government.
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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, August 6th.
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