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Creative Leisure News
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Email: mike@clnonline.com
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Date:
March 4, 2002 TABLE OF CONTENTSCOMMENTARY: COMMENTS FROM READERSThis issue contains a number of interesting emails and comments from readers, so I thought I would reiterate my policies regarding publishing such items.1. I decide that the item in question is interesting. I may not agree with it, but I want Creative Leisure News to be a forum for discussing industry issues that ultimately affect all of us. 2. If asked, I'll withhold the name of the author. Often people have interesting things to say, but are worried about offending customers. I do not tell anybody who wrote what. However, you must sign your name to me. 3. I reserve the right to edit for clarity and length. I'll fix grammar mistakes and misspellings, too. 4. I won't print unverified rumors or complaints about a particular company or person. So feel free to send your thoughts about the letters in this issue -- or on any industry topic. The address is mike@clnonline.com; fax 309-925-9068; or call 309-925-5593.
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A.C. MOORE SALES ZOOMSales for the year ended December 31 rose 27% to $332.4 million, and same-store sales grew 8%. Net income jumped 45% to $9.5 million ($1.23/diluted share), and EBITDA rose 46% to $21.4 million.For the fourth quarter, net income rose 47% to $9.5 million ($1.20/diluted share). Sales rose 32% to $122.6 million and same-store sales increased by a whopping 15%. CEO Jack Parker said the secondary stock offering announced in January should be completed this quarter, which "combined with our operating and growth strategies, will enable us to continue to move forward." The current store count is 63, all in the eastern U.S. More new stores are in the works, but Washington, D.C. is the only new area. The other new stores will complete the penetration in existing markets.
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A "STALE SEWING STORE INTO A FASHION RETAILER""The transformation of a stale sewing store into a fresh fashion retailer is moving ahead," said Hancock CEO Larry Kirk as he announced the company's fiscal year and fourth quarter results.For the 53 weeks ended Feb. 3, sales increased 6.9% to $411.9 million, and net income jumped 35% to $14.7 million ($.85/diluted share). Sales for the 14-week fourth quarter rose 22.2% to $123.7 million, and net income rose 56% to $7.9 million ($.44/diluted share). The extra week in 2001 added $8.2 million to total sales in the fourth quarter and the full year. Same-store sales increased 16.8% in January, 14.6% in the fourth quarter, and 6.3% for the year. These figures were determined by comparing the same 14-week and 53-week periods of each year, officials said. CEO Larry Kirk attributed the big earnings increase to strong comparable sales, good gross margins, and meaningful expense leverage. "Productivity continued to improve as evidenced by higher sales with less inventory than a year ago," Kirk said. Among the interesting items of note in Kirk's comments: Sewing machine sales rose 60+% in 2001, following a 50% increase in 2000. ... The company is debt free. ... Hancock's strong balance sheet "will allow us to take advantage of unusual market opportunities ... and we are actively working to grow organically and by acquisitions." ... The home dec store-within-a-store concept is in 160 stores, where it represents 31% of the stores' sales; home dec sales are 24% of the total in the old-concept stores. The goal is 40% in all stores. ... Almost 40% of Hancock's outstanding shares have been repurchased and 1.4 million shares remain available for repurchase. During the quarter Hancock opened 10 stores and closed 8, bringing the current store count to 439 stores in 42 states. The Hancock Board of Directors also doubled the size the quarterly cash dividend to 8 cents/share, payable April 15 to shareholders of record April 1.
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DUNCAN INVESTS IN PSXDuncan Enterprises purchased a 50% share of PSX, the rubber stamp, sticker, and design company formerly known as Personal Stamp Exchange. Under the terms of the agreement, Jim Doty, CEO of PSX, retains the other 50%.The agreement calls for Doty to continue to be CEO of PSX, which will operate as a completely separate, stand-alone corporate entity, and it will continue to market, sell, and ship PSX products from its Santa Rosa, California location. "We are delighted with the many shared benefits that we feel will ultimately result from this agreement," notes Larry Duncan, President of Duncan. "When we put together our process, technological, and logistics competencies with a strong design powerhouse like PSX, we see enormous potential for both companies." Duncan and Doty have also retained PSX founder Marina Golden to provide ongoing design consulting services. The collaboration between the two companies was evident at the HIA show in January, where Duncan introduced several Tulip Premium Rub-On Transfers featuring PSX designs.
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BERWICK ACQUIRES OFFRAYThe Berwick subsidiary of CSS Industries signed a definitive agreement to acquire substantially all of the business and assets of C. M. Offray & Son, making Berwick the largest producer and distributor of ribbon in the world. The price is about $45 million in cash and "subject to certain post-closing adjustments and indemnification obligations," CSS announced. The deal is expected to close on March 15.A leading producer of woven-edge ribbon, Offray is more than 125 years old and had sales of $99 million in 2001. In the past, the company has also supplied ribbon for the medal winners at the Olympics. A leading producer of cut-edge ribbon, Berwick was founded in 1945 and employs about 1,000 workers in the U.S. CSS manufactures products such as gift wrap and bags, greeting cards, tissue paper, paper and vinyl decorations, Halloween products, Easter egg dyes, novelties, etc. CSS is a publicly held company whose stock trades under the symbol CSS. On Feb. 5th, the company reported a third-quarter net income of $23 million on sales of $236 million. In the past year, the stock price has ranged from $20.55 to $32.43. It closed on Friday at $29.65.
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WAL-MART KEEPS ROLLINGThe juggernaut continues. Sales for the fiscal year ended Jan. 31 were up 13.8% to $217.8 billion, higher than any other company in the world. Net income rose 6% to $6.67 billion ($1.49/share). For the U.S. stores division, same-store sales were up 5.9% for the year and 6.9% for the quarter.For the fourth quarter, net income rose 8.9% to $2 billion ($0.49/share). Sales increased 13.5% to $64.2 billion. CEO/President Lee Scott said, "Although we did not attain our goal of increasing earnings at the same rate of sales, our 8.9% growth in earnings per share in the fourth quarter represents more than triple the growth rate experienced in the first six months of the year." (Comment: No doubt the better numbers in the fourth quarter are due in large part to Kmart's bankruptcy.) Lately the stock has been hovering around $60. There have been times in the past when the stock price has reached this high and the company has split the stock.
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NEW FOR ACCI: INTERACTIVE ZONESACCI exhibitors will have additional opportunities to display and demonstrate their products, thanks to an innovative new element to the show, Interactive Zones."These Interactive Zones are large, dynamic presentation areas on the show floor where buyers will find ongoing product demonstrations, free project sheets, book signings, guest speakers, displays with new projects for established products, and copies of the industry's trade and consumer publications," explained Marrijane Jones, ACCI's Executive Director. Each Interactive Zone will represent a particular group of product categories and have its own logo. The categories (and logos) are General Crafts ("General Assembly") ... Fabric/Yarn/Sewing ("Common Threads") ... Florals ("Blooming Business") ...Art Materials/Framing ("The Big Picture")... Gifts/Home Decor ("At Home")... and Cards/Papers/Stationery ("Note Worthy"). "The Zones will include a lot of activity for retailers," Jones added, "and exhibitors will have an opportunity to participate in all of the areas listed above, making the Zones yet another place to expose their products to buyers." Forms for exhibitor participation in the Zones will be mailed later this month. "We have a lot of exciting new events, activities, and opportunities planned for this year's show," Jones concluded, "and the Interactive Zones are just the beginning." The 2002 ACCI show will be July 19-21, with classes beginning on Thursday, July 18. For more information, call 740-452-4541; fax 740-452-2552; email acci.info@offinger.com; or visit www.accicrafts.org.
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WHAT HAPPENED TO OUR CREATIVITY?(Note: What follows is a letter from an industry veteran. I don't agree with all of it -- see more comments after the letter -- but it is thought-provoking.)"I've been in this industry a heck of a long time and let me assure you, it's not your grandpa's industry anymore. "My children assure me change is good, that longing for the old days is a sign I'm ready to be committed to the old folks' home, but we had it good then. We don't have it good now. "Sure -- if we are to believe the latest HIA survey -- the total dollars spent in the industry keep rising, we keep getting bigger. But at what expense? When we were an industry run by small shops, we had some power. Today we are an industry run by Wall Street. What does Wall Street know about crafts? "Long ago an industry guru warned me that the loss of the small shops would mean we've killed the goose that laid the golden egg. Those small shops brought new ideas and new products to the industry; they weren't afraid to try. "The creativity that spawned this industry --where is it? Unless you have lots of bucks, you can't start something new and hope for success. And unless you can prove that what you have is a winner, forgetaboutit; the chain buyers can't afford to take a chance. They have to have a good quarter or Wall Street will scream. "Create something new and you wait a long time to see it appearing before the public. You have to wait until the chain buyer can make room, get approved by the powers that be, and figure out how it fits into his plan. "This really came home to me right after September 11. In 1990 when we last went to war, we published several patriotic pattern books. We took the books to HIA, sent out samples, and sent mailings to our customers. The books sold out quickly, and we were into our second and third printings before the war ended. In fact, I felt a little guilty as if we were war profiteers. "Now move forward to September 11, 2001. We have patriotic books again, and we send out samples and mailings. Our results are less than satisfactory. First, we have so few independents that we really have very few customers, but we can sell lots of one title to a chain. But the chains? Well, they've all got a problem: the planogram just doesn't allow them to sneak in books. The consumer who might have wanted to create a patriotic afghan or quilt is left looking. No room at the inn. "What does this say about the future? Not only are we in trouble with the loss of the small shops, but soon small manufacturers will be pushed out because they can't afford to wait. We'll be left with an industry of Wall Street gurus who have no idea what the craft industry is about, who don't understand what America wants. And the consumer? She'll look elsewhere for her spare time activities. It won't be crafts. Maybe it'll be cooking." -- Name withheld (Note: Many stores did have numerous patriotic items in their stores soon after Sept. 11, but some of the problems cited in the letter are valid. Any suggestions? What can we do to improve the situation? Give me your ideas (on or off the record) and I'll share them in a future issue. Call me at 309-925-5593 or email mike@clnonline.com.)
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PLASTIC CANVAS: "NOT GOOD ENOUGH"?(Note: The discussion continues about the danger of retailers looking down their noses at plastic canvas -- or any product)."In the mid-80s, when all was lovely in the plastic canvas market, there were several magazines, books, and magazine columns featuring plastic canvas. I worked for a company that manufactured plastic canvas seven days a week, 24-hours a day. Plastic canvas was made in 54 colors in five different styles, and there were tools and accessories galore. "One day, our banker brought in two ladies who had approached him for a loan, as they wanted to open a cross-stitch shop. Knowing the challenges and costs associated with a new business, we shared information about industry trade associations and shows, and offered to provide them with the complete line of plastic canvas products and racks ON CONSIGNMENT. "They exchanged a look and refused the offer, saying that they didn't want plastic canvas in their store, as it was not appropriate for the clientele they wished to attract. "They never did open that store. One factor may have been that they turned down free product in front of their banker." -- Name Withheld
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EMAIL FROM A NEW EXHIBITORWe received the following note from a first-time exhibitor at the recent HIA show. They're responding to "Eyewitness To A Ripoff" that appeared in our recent edition."Your story on rip-offs really hit home for us. [At our booth in the New Exhibitor section] we had numerous groups of men in dark suits (sans nametags) who would stand about 10 feet away from our booth observing, but would not come up to talk to us. "We spotted lots of competitors' badges cruising by slowly, as well. At one point we were talking with a distributor when a gentleman came up to our booth, took a catalog, and perused our product. His nametag was flipped over, so we couldn't identify who he was. After he left the booth, the distributor told us we shouldn't have given him a catalog because he was a manufacturer from another country who was known for ripping off ideas. "Who knew? Now we're trying to rush decisions because we're fearful that competitors will be out there with knock-offs before we even get a chance to market our line properly. "We believe a major vendor saw our prototypes at last year's ACCI show, and launched a line with some similarities to ours, using part of our company name in their marketing efforts. "It stinks, but what can we do? Now we have to get out there quickly. What can small start-ups do to defend ourselves?" -- Name Withheld Comment: This probably isn't any consolation, but this kind of activity has been going on for decades, and it may be a compliment that other manufacturers think you have a good idea.
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MAKING A PROFIT -- AT WHOSE EXPENSE?(Note: The following is an email from a vendor who worked for many years as a retailer.)We have talked about the large retailers in our industry driving the vendors right out of a profit. For a long time I blamed the manufacturers for putting less in a box and charging the same or higher prices. I have had a change of heart. Retail chains are demanding more and more; the only solution for vendors is to short the pack. After spending my life in retail and defending it forever, I have also changed my mind on several other things. Now I firmly believe that retailers in and out of our industry are marking things up way too high, then promoting a sale. Is 40% off now regular price? And why are retailers getting so darn lazy, that they mark down entire departments, or the whole store? I've heard for some time that there are no merchandisers out there and I believe it. It's only "What can I beat vendors out of? How many discounts? How many rebates? How cheap can I get it?" The really interesting thing is, retailers who ran their business well -- kept up with orders, had inventory, had service -- did well. The basics don't change. -- Name Withheld Comment: Judging from the annual reports announced in this issue, and those to come later this month, the chains must be doing something right. But are the vendors' profits increasing as much as the chains'? Aren't vendors and retailers supposed to be partners?
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RANDOM NOTES, RANDOM THOUGHTS1. I learned of the item in "Miscellaneous News" regarding Health magazine's article on knitting from industry consultant Ellie Joos. I can't read all the magazines and newspapers out there, so if you read something about our industry, please let me know and I'll share it with CLN's readers. Email me at mike@clnonline.com.Health called knitting "the new yoga.." That might sound a little far-fetched, but it isn't. Retailer Bob Ferguson told me his traditional knitting classes would attract about three middle-age women. He changed the class to make it knitting/yoga, and now the classes are filled, usually with younger women. 2. I'm hearing that some vendors are finding the HIA show wasn't as positive as they'd hoped. Follow-up conversations/visits to retailers aren't closing the sales as they'd hoped. The biggest problems are a) "I like your line but I don't have room for it" and b) demands for "excessive" markdown allowances. 3. I thought I was going to die of old age before the Berwick/Offray and Duncan/PSX deals were completed. If you buy or sell a company, assume it will take the beancounters and lawyers a few MONTHS after the initial handshake before the deal is really completed. 4. There's a new size of instruction book that looks like it has a lot of potential. It's 10.5" long, as usual, but only 4" wide. It's designed to be pegged or clipped adjacent to the products called for in the books. So far, I've seen such books relating to various categories (painting, weddings) by Grace Publications and Hot Off The Press -- and I bet we see more. It makes it easier and more inviting to the consumer to have the instructions right next to the products.
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MISCELLANEOUS NEWSHIA. Soon HIA should learn more about its $2.4 million in reserve assets that have been frozen by the courts as part of the investigation of Bentley Financial Services, a placement firm HIA used for investments. HIA's investment strategy is to focus on fixed income investments, officials say. Existing programs are funded from current membership and trade show revenues, and Exec. Director Pat Koziol says HIA "... has adequate operating funds outside these investments to maintain member programs in 2002 and beyond." (Note: We reported on this in the Feb. 4th edition of CLN after Alan Rosskamm, then president of the HIA board, revealed the situation at the annual business meeting during the show. Click on the "CLN Archives" button to read the issue.)KMART. Told the bankruptcy court it will announce its store closings a week from today -- March 11. Rumors say the number of stores to close will be as high as 700, but Chairman James Adamson said that number was "too high." MICHAELS. Releases its February sales and fiscal year earnings results this Wednesday, and hosts a conference call at 4 pm CST to discuss them. To participate, dial 973-633-6740, or access it at www.michaels.com. (Visit the site 15 minutes early to register and install any necessary audio software.) A replay will be archived until March 13th and can be accessed at www.michaels.com, or by phone at 973-633-6740, PIN #2943312. JO-ANN'S. Releases its fourth quarter and fiscal year results March 12 and there's a conference call at 10 am EST. To listen, surf to www.joann.com; click on "About Jo-Ann"," then "Our Company"; then "Investor Relations"; and the Conference Call icon. Judging from the sales figures reported in our last issue, the fourth-quarter data should be positive. MEDIA. In its March issue Health magazine published "Knitting: The New Yoga," which describes knitting's ability to reduce stress, the increase in the number of younger knitters and knitting circles, and even how it helps cancer patients. "For many, knitting is the comfort food of craft." ... The March issue of Lucky magazine (a high-circulation magazine for shoppers) showed high-fashion belts created by macrame. Another layout featured airbrushed T-shirts. WEB. Berroco, a seventh-generation yarn importer, recently launched a full-scale web site, www.berroco.com, that features hand-knitting yarns from around the globe. It features fashion news by Creative Director Margery Winter, a free email newsletter, online shade cards for Berroco's 30 plus yarn lines, 250+ free patterns, and listings of independent yarn shops in the U.S. and Canada. The site was/is developed, implemented, and maintained by Lynn Carlisle of Carlisle Communications (ljc@carlislecommunications.com). PEOPLE. Craft tv hostess Tiffany Windsor has signed to represent Decra Led , the "faux" stained glass product distributed in the U.S. by EZ Craft and Darice. Tiffany's most recent production is InspiredatHome.com, an online magazine for creative people, and an accompanying tv series. SHIPPING. HIA members can now receive 9% - 43% discounts on their FedEx shipping, based on the service selected, package size and weight, and delivery zone. Call HIA's Pam May at 201-794-1133 or email pmay@hobby.org. JOB OPENING. West Coast company is looking for a Product Manager with 2+ years of craft industry experience in a similar position. Salary range around $50K. For more info, call Russ in confidence at 203-333-7397. AWARD. Multi-Ply Wood Design (www.multi-ply.com) won the Outstanding Exporter award during the 25th Annual Atlantic Canada Craft trade show held recently in Halifax, NS. STORAGE. The Closet Factory (www.closetfactory.com) has a new Family Convergence Center that includes a media center, two computer tables, about 30 cubbyholes -- and a craft table. CONDOLENCES. George L. Miller died recently of a heart attack. George was President of Watoni Trading Company in Jeddah, Saudi Arabia, and had served in various buying and operations positions for Silk Greenhouse, Treasure House, and Michaels.
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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*: 33.01 ... Change**: +3.78Ames (AMESQ). Last*: 0.16 ... Change**: UNC Hancock Fabrics (HKF). Last*: 14.75 ... Change**: +1.83 Jo-Ann Stores (JAS.A) [a]. Last*: 14.35 ... Change**: +1.25 Michaels (MIK). Last*: 32.28 ... Change**: -0.34 Rag Shops (RAGS). Last*: 4.02 ... Change**: +0.72 Wal-Mart (WMT). Last*: 62.81 ... Change**: +2.78 CLN Retail Index. Last*: 164.44 ... Change**: +6.5% Dow Jones Index. Last*: 10,368.86 ... Change**: +4.7% *March 1 ** from February 15 [a] voting share Prices are exclusive of dividends
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BABY BOOMERS & MULTI-TASKING(Note: This was emailed from a friend.)They have finally found a diagnosis for my condition, A.A.A.D.D. -- Age Activated Attention Deficit Disorder. This is how it goes: I decide to wash the car; I start toward the garage and notice the mail on the table. So I start to go through the mail. I lay the car keys down on the desk, discard the junk mail, and see the trash can is full. I'll put the bills on my desk and take out the trash, but since I'll be near the mailbox anyway, I'll pay these bills first. Where is my checkbook? Oops, there's only one check left. My extra checks are in my desk. Oh, there's the coke I was drinking. I'll look for those checks, but first I should put my coke further away from the computer, or pop it into the fridge to keep it cold for a while. I head towards the kitchen and my flowers catch my eye; they need water. I set the coke on the counter and uh oh! There are my glasses. I was looking for them all morning! I'd better put them away first. I fill a container with water and head for the flower pots --Agh! Someone left the tv remote in the kitchen. We won't think to look in there when we want to watch tv, so I'd better put it back in the family room where it belongs. I splash some water into the pots and onto the floor, throw the remote onto the sofa, and return down the hall trying to figure out what it was I was going to do. End of Day: The car is dirty, the bills are unpaid, the coke is on the kitchen counter, the flowers are half watered, the checkbook still only has one check, and I can't find my car keys! When I try to figure out how come nothing got done today, I'm baffled because I KNOW I WAS BUSY ALL DAY LONG!
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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, March 18th.
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