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Creative Leisure News
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Email: mike@clnonline.com
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Date:
March 18, 2002 TABLE OF CONTENTSCOMMENTARY: SUCCESS CAN BE DANGEROUSI was happy to hear that Jo-Ann's is not planning to open more stores next year (see below). While the company's fourth-quarter report shows the turnaround strategies are working, officials obviously realize more work needs to be done before setting out to conquer new territory.A few years ago, A.C. Moore seemed to be doing just fine, but CEO Jack Parker put a six-month hold on new-store expansion. Wall Street was temporarily puzzled, but A.C. Moore has performed even better ever since. When Michael Rouleau took charge at Michaels, he concentrated on strengthening the company's financial and internal systems. The company's been going gangbusters ever since. Hancock is more concerned with incorporating its home-dec center into existing stores rather than opening stores to dazzle Wall Street. The president of a major manufacturing company recently told me that he called off preliminary discussions to acquire two companies. Apparently the companies could have been purchased for a great price, "but my people are already working at full capacity," he said. "These deals could have killed us." There's a lesson here for all of us: make sure your house is in order before any major expansion. Often people (including Wall Street) equate expansion with success, but over the years I've seen as many companies killed by too much success too soon, as by failure..
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JO-ANN'S MAKES GOOD ON PROMISESAs promised by Jo-Ann's officials, the fourth-quarter results indicate the company has turned the corner. For the quarter ended Feb. 2, net income, excluding unusual charges from both years, jumped 74% to $23 million ($1.22/diluted share). Excluding a 53rd week the previous year, sales increased 5.2% and same-store sales were up 7.4%. Earnings before interest, taxes, depreciation, and amortization (EBITDA) improved to 11% from 7.9% of sales.For the year, sales rose 5.9% to $1.57 billion. Excluding fiscal 2001's 53rd week, sales increased 7.5% and same-store sales increased 5.9%. EBITDA fell to 4.8% from 5.8% of sales. Excluding one-time charges, net income fell from $0.63/share to 10 cents -- not unexpected, given the company's turnaround efforts during the first three quarters. Chair/CEO Alan Rosskamm said, "We made substantial progress on our key turnaround initiatives of improving inventory in-stocks, eliminating non-productive inventory, and eliminating under-performing stores. Particularly satisfying was our ability to deliver the fourth quarter operating results, while still exceeding our balance sheet goals on inventory and debt reduction. "The charges associated with our turnaround plan are now behind us," Rosskamm added, "and we are well positioned to return to meaningful profit growth in the new fiscal year. We remain committed to further reducing debt and improving overall performance in fiscal 2003." During the year the company opened 12 Jo-Ann etc superstores, relocated 10 traditional stores, and closed 60 under-performing traditional stores. Officials said this year they expected same-store sales growth of 3-4% (higher in the first quarter, then less as the current figures are compared to the SKU Reduction Initiative the company enacted last year). Margins should improve, too, since the company won't be engaging in closing out about $60 million discontinued merchandise. Another 50 stores will close this year. No new stores are planned, so capital spending will drop to $15-20 million. Instead, the company will focus on debt reduction and expects to lower its debt by $30-$40 million this year. That will lower interest expense by $2 million. The bottom line: officials expect profits of $0.80-$0.85 cents/share this year, a huge increase over this past year's 10 cents/share result. The new year is off to a strong start, too. February same-store sales increased 14.7% and the stock price has almost doubled since January 1..
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MICHAELS CONTINUES TO ROLLAs expected, Michaels had a great year. Net income was $89.0 million ($1.33/diluted share). Excluding the effects of one-time charges, net income was $100.7 million, an increase of 25%. Annual sales rose 13% to $2.531 billion, and same-store sales increased 5%.For the fourth quarter, net income was $63.6 million ($.92), compared to $50.1 million ($.76) the previous year. Without the one- time charges, net income would have been $66.5 million, up 33%. Quarterly sales increased 11% to $908.0 million, with same-store sales up 6%. CEO Michael Rouleau said, "We are proud of this performance and remain very optimistic about our future. The investments we've made in our infrastructure over the last few years are just starting to pay off, and we expect them to support our momentum." As part of the HIA-sponsored National Craft Month, Michaels is hosting a "Free Family Event" at each of its 700+ stores this Saturday from 10 am to noon and from 1 pm to 3 pm. The "Event" will feature "Giant Jungle Bug" projects, intended to introduce families to the fun and closeness hands-on crafting provides. Store personnel would teach the projects and supply all of the materials, free..
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HIA WAITS FOR COURT ACTIONLittle has changed since we reported on at least some of the Hobby Industry Association's $2.4 million in reserve assets being frozen by the courts. The court-appointed trustee submitted a report on the financial assets of Bentley Financial Services on March 7th, but the court has not yet released the document.As we reported in previous issues, HIA officials say they have enough money to continue all member programs through 2002 and beyond. The HIA money in question is reserves only; ongoing operations are funded by dues, trade show fees, etc. To recap, reserves were invested through a company called Bentley Financial Services. There is a web site devoted to the investigation at http://www.bfscorp.net/default.asp?S=7952. On October 23, 2001, the Securities and Exchange Commission filed a complaint against a Robert Bentley, Entrust Group, and Bentley Financial Services, all of Paoli, PA. The SEC asked the court for an injunction freezing Bentley's assets and stopping the company from further business, which the court subsequently granted. In the summary of the complaint, the SEC charges, among other things, the following: "1. The defendants are engaged in a fraudulent scheme to offer and sell privately issued notes which they falsely claim are bank issued certificates of deposit ( CD's') or interests in such CD's which are insured by the Federal Deposit Insurance Corp. ( FDIC'). Defendants' investors include numerous small banks, credit unions, and individual investors. Defendants' records show that they have, as of mid-September 2001, at least $318 million of such notes outstanding which have been issued to more than 3,000 investors. Defendants claim to have "invested" more than $4 billion of investor funds since their scheme began in approximately 1986. "2. Defendants are conducting a fraudulent scheme because investors can obtain a return of their principal investment at the promised maturity date only if defendants are able to find additional investors." Essentially, the SEC is charging Bentley with taking investors' money and buying certificates of deposit with longer maturation dates and higher interest amounts than they were telling investors. The scheme would work like this: An unsuspecting investor thinks he's buying a $1,000, one-year CD that pays 5%. But Bentley buys a two-year CD that pays 6%. As long as Bentley has the $1,050 on hand to pay off the investor a year later, Bentley can eventually pocket the higher interest payment. In some aspects the case is like a bankruptcy proceeding. HIA officials, like bankruptcy creditors, don't know specifics until the court proceedings are concluded. CNA requested an interview with Bill Reed, president of the HIA Board of Directors, who responded with a letter which said, in part, "HIA has provided you, and its membership, at the Annual Meeting on January 29th with the most up-to-date information we have. We are in a holding pattern until a recovery date is known, which may precede your May publication date. We will provide you and the HIA membership with the most current data as it arrives. Therefore, we see no need for an interview at this time." (Note: If you're wondering why HIA has money in reserve, imagine if the Sept. 11 terrorist attacks had occurred two days before the HIA trade show.).
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17 WAYS TO MAXIMIZE YOUR TRADE SHOW INVESTMENTYes, it's not that long since you've returned from the January shows, but the summer shows will be here before you know it. Considering how much it costs to exhibit at trade shows, it makes sense to get the most out of them. Some suggestions -- in more or less chronological order:1. Trade Magazines, I. CNA and Craftrends will run new product editorial sections in conjunction with their trade show issues. The deadline for their July issues (ACCI and INRG) is probably early to mid May. Learn the deadlines and send press releases and photos. 2. Trade Magazines, II. Consider advertising, at least in the show issues. Both show attendees and non-attendees will study those issues to see if they missed anything. 3. Creative Leisure News. If you can't get new product info to the trade magazines in time for their deadlines, send it here. As we did in January, we'll publish product information. 4. Appointments. Are there some key buyers you want to see? Call them in advance to determine a specific time for them to visit your booth. Do the same with magazine editors. 5. Staff Training. Make certain all your booth personnel know how to use your products, who makes the products used in conjunction with yours, freight policies, availability for immediate shipping, etc. 6. Postcards. Send them to every buyer on your list. List your booth number, any show specials, and tease them about new products. And some trade shows (ACCI, for one) offer the buyer pre-registration lists about three weeks in advance of the show. Most shows offer free, unlimited quantities of stickers and stuffers to use to promote show attendance. Call each show's sponsor to see what's available. 7. Madeups. Planning on the same, tired old madeups? Get some new ones -- particularly showing your existing products used in new ways. 8. Press Room. Many trade shows (ACCI and HIA, for examples) will have a press room where journalists can pick up copies of exhibitors' press releases. Take advantage of this service -- don't assume every magazine will stop by your booth. 9. New Product Areas. Most shows now have a new-product display area, usually somewhere near the buyer registration area. Virtually every buyer looks at that display first. 10. Interactive Zones. ACCI is offering a variety of ways to give your products exposure outside your booth. Details will be sent to exhibitors soon, but as we described in our previous issue, exhibitors can sponsor a demonstration, distribute project sheets, and display projects. If this concept is successful, look for other shows to adapt it to their needs. 11. Demos, Make-it/Take-its. They attract crowds, and crowds pique the curiosity of buyers passing by. (Note: Retailers are happy just watching a knowledgeable demonstrator show how a product is used. If you don't sell to Professional Crafters, use a demonstrator rather than sponsor a make-it/take-it.) 12. Show Specials. If you want to encourage buyers to place orders at the show (and who doesn't?), offer a discount of some sort for immediate orders. And make certain you have signs big/clear enough that explain the specials to buyers in the aisle. 13. Sponsorships. Many shows offer opportunities to put your company logo on badge lanyards, bus signage, etc. Call the show sponsor and see what's available. 14. Shipping. At summer shows many buyers -- large and small -- are looking for items to complete their fall/Christmas inventory. Some still need to complete their back-to-school offerings. If you have items/lines in stock, place signs saying "Ready For Immediate Shipping" next to the items. 15. Distributors. Print copies of a list of all of your distributors to distribute to either all of your buyers or at least to those who can't order your minimums. 16. During the Show. Take careful notes of what you've promised prospective buyers! 17. Show Follow-up. Many buyers no longer place orders at shows. The value of your ultimate show investment will probably be determined by what you do after the show..
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IN DEFENSE OF CHAIN BUYERSHere are excerpts from a letter to The Bloom Report, the excellent, free, online business newsletter for the toy industry. (For more information, to go www.thebloomreport.com.) This letter is from a chain buyer, responding to complaints from vendors about the difficulty of getting an appointment with many buyers."I've been a buyer and merchandise manager for 20 years and the job has changed dramatically. It USED TO be a job where you spent your time seeking unique vendors and the best products. It has developed into a job of managing vendor programs and managing to computer systems. "Retailers have cut back dramatically on the people managing and buying over the last 20 years. This is a direct result of the price competitive nature of business now. The upshot is that people have too much to manage and not enough time to manage it. "There is a ridiculous amount of time pressure. Does this mean good products are passed up by these buyers? Yes, but the conscientious ones don't like it; they just can't do anything to prevent it. "The best thing to do, if you're passed up, is get your product in as many doors as possible. When it's a craze in all the specialty retailers, the large retailers will see you at the next show." -- Name withheld.
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RANDOM NOTES, RANDOM THOUGHTS1. Recently I've been corresponding with Joan Pomp, who retired from AMACO and is now living in Florida. Joan is involved with an Alzheimer's "respite" program coordinated by the Alzheimer's Association and the National Alliance of Churches.It's a great program in which volunteers go into homes that have an Alzheimer's patient and relieve the care giver for a few hours. My mother had Alzheimer's and lived with us for four years. Trust me, a few hours of relief to go to the store or just relax is a godsend. Anyway, Joan is looking for suggestions for simple craft projects she can teach to the Alzheimer's patients she "sits" with. Obviously it depends on the severity of the disease, but for patients in the early and perhaps middle stages, craft projects would be wonderful. But which crafts? Joan had already thought of rubber stamps; I suggested low-count plastic canvas. If appropriate photographs are available, basic scrapbooking would be wonderful. (Often the patients' long-term memory is much better than their short-term memory.) Any suggestions on craft categories or particular projects? Let me know and I'll pass them along -- or contact Joan directly. Joan Pomp, 3770 Hickory Hill Blvd., Titusville, FL 32780. Call/fax 321-264-2398; or email nutcrack@bv.net. 2. In my last issue I described a "new" size of instruction book -- 10.5" x 4", which allows retailers to display the books immediately adjacent to the appropriate products. Turns out it's not as new as I thought. Jean Kievlan has written a series of books this size called Designer Sketchbook for Lara's Crafts . There are at least five in the line..
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MISCELLANEOUS NEWSFRANK'S. The bankruptcy approved Frank's disclosure statement for its reorganization plan. Now Frank's will solicit votes from creditors and equity holders for their approval of the plan. The court scheduled a confirmation hearing on May 1. The revised disclosure statement will be available tomorrow on Frank's website at www.franks.com.FEBRUARY SALES. Once again the same-store sales figures for industry related retailers generally outperformed the overall retail industry. Jo-Ann's , +14.7% ... Wal-Mart, +10.3% ... Duckwall-ALCO, +8.5% ... Target, +8.5% ... Hancock, +6.3%, thanks in part to home dec categories, officials said ... Michaels, +6.0%. AMES. The top execs from the bankrupt chain met with their creditors' committee and reported the following: 2001 sales were $3.19 billion; 2002 sales are expected to decrease by 5%, thanks to fewer stores. Execs also expect to benefit from Kmart store closings. MACRAME. In our last issue we mentioned Lucky, a high-circulation magazine for fashion shopping, featured macrame. Now we've learned the current issue of Bazaar is featuring a macrame belt, purse, and headband. Yarn has made a comeback by appealing to younger women's fashion sense -- why not macrame? JOB OPENING. Manufacturer looking for two Product Managers with design experience -- one for die cut paper/foam products in general crafts and scrapbooking, and one for rubber stamps. Location not an issue. Email resumes in confidence to CLN's Mike Hartnett and they will be forwarded to the employer. PAINTING. The brush wars have a new combatant -- the Sceptre Gold II line from Winsor & Newton is a sable-synthetic blend. The line of watercolor and oil brushes includes long and short handle brushes in round, designer round, rigger, flat, flat wash, wash, and fan series, from size 0000 to size 20. Available now, the suggested retail prices range from $5.10 for individual brushes to $31.60 for presentation sets. DISTRIBUTION. Jo-Ann's has implemented the Exceed distribution software system from EXE Techologies at its Visalia, California warehouse, and plans to do the same later this year at the Hudson, Ohio warehouse. "... using the EXE solution, we were able to save on freight costs as well as drop 1-2 weeks off the lead-time of getting products from our distribution centers to our stores," said VP of Systems Development Tim Lemieux. SEWING. America Sews with Sue Hausmann rolls on. The 14th series uplinks to PBS stations April 7. Sponsors include Viking, Jo-Ann's, Sulky, The Warm Co., American Sewing Guild, Gadget Girls, Havel's, Katie Lane Quilts, Krause Publications, Ott Lite, Quilt Smart, Rowenta, Sudberry, and Taunton Press. WINNER. Plaid awarded Cindy Rippe the $3,000 Horizons Award for the Society of Craft Designers member "exhibiting the strongest combination of personal development goals and history of past achievements." Cindy is best known as the designer of the home office and computer accessories, Computer Cozies. SHOWS. ACCI has scheduled six retailer business seminars on Thursday, July 18, the day before the trade show opens in Rosemont, IL. The entire day of sessions will be offered at a discount, or tickets can be purchased individually. Retailers who purchase for the entire day will get a private preview of the new products at a "Product Premiere Party" that evening with free food, drink, and dancing. The titles: "Retail Success! Increase Sales, Maximize Profits, and Wow Your Customers" ... "Distinguish Ability: A Business Building Strategy for Retailers" ... "How to Increase Your Business by 25% -- Starting Now!" ... "Million $ Marketing on a Shoestring Budget" ... "X-Citing and Unique Promotions that Drive Traffic" ... "Seeing Through Your Customers' Eyes". For show/seminar info, call 888-360-2224; email acci.info@offinger.com; or visit www.accicrafts.org. QUOTATION. "Between 8 - 12, boys and girls are spending big money on the latest food, music ... and gadgets. The age of the tweenager' is here." -- London Financial Times.
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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*: 37.10 ... Change**: +4.09Ames (AMES). Last*: 0.15 ... Change**: -0.01 Hancock Fabrics (HKF). Last*: 17.91 ... Change**: +0.10 Jo-Ann Stores (JAS.A) [a]. Last*: 13.45 ... Change**: -0.90 Michaels (MIK). Last*: 38.50 ... Change**: +6.22 Rag Shops (RAGS). Last*: 4.03 ... Change**: +0.01 Wal-Mart (WMT). Last*: 63.75 ... Change**: +0.94 CLN Retail Index. Last*: 174.891 ... Change**: +6.4% Dow Jones Index. Last*: 10,607.23 ... Change**: +2.3% *March 15 ** from February 15 [a] voting share Prices are exclusive of dividends.
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HELPING OUR TROOPSLast November, T.SGT. Dora McFadyen, deployed overseas in Operation Enduring Freedom as a member of the Tennessee Air National Guard, wrote to Candamar Designs requesting extra floss to complete a project she was stitching. She also mentioned that several others in her troop enjoyed Candamar's products and still more would like to try them.Candamar responded by sending floss, several dozen kits, and a special "Thank You" card applauding the troops' efforts. Then Candamar received this: "To the Thoughtful People at Candamar Designs, "I wanted to take a moment and thank you all for the beautiful card and box of goodies. I shared them with the troops and I've even got some of the guys cross-stitching. We've been able to pass many long shifts much easier thanks to you all, it is people and companies like you that make our country so great and worth fighting for. Again thank you from the bottom of my heart. "The enthusiasm and support your employees and company have displayed is truly a symbol of great patriotism and was truly appreciated not only by the troops, but also by our families back home. I know when I told my mother how generous and supportive you all were, she cried. "So I just wanted you all to know that while it may have seemed like a small gesture of kindness to you at the time, it means so much more to all of us to know the American people are behind us and willing to support us during this great effort." (Note: there's a great photograph of McFadyen and three comrades posted on the Candamar website at http://www.candamar.com/troops.html.) A Candamar official said, "This meant a great deal more to them than we anticipated. A small gesture on our part gave them something to work on and perhaps divert their thoughts while they are missing their families back home. "Just a thought but we (the industry) could all do something similar to help.".
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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, April 1st. Will it be an April Fool's edition? We'll see.
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