COMMENTARY: WHAT GOES AROUND
...
Interesting call from a friend: "I think the industry is
being picked apart. You know how many places, in addition to craft
stores, you can find florals, scrapbooking, candles, framed art, and
framing -- custom and readymade?"
He described going to his local Michaels store and meeting
the merchandise manager of a large chain that theoretically has
nothing to do with crafts. The manager told my friend he visits
Michaels once a month with the goal of finding three items to start
selling in his chain.
Years ago craft stores picked over items from other stores, such as
needlework, paint, and toy stores. Now it seems to be happening to
us.
NEW COLUMNS THIS ISSUE
Business-Wise.
What the older generation has done for us, and what we've lost.
Kate's
Collage. Respecting others: a good way to live, and good
business, too.
Reminder: If you surf to one of the above columns and you see
an "old" column, click on your "Refresh" or
"Reload" buttons on your browser.
THE OUTLOOK FOR THE FOURTH
QUARTER
"Sure wish my crystal ball was as clear today as it has been
in years past," one retailer told CLN, "but I feel
a bit like the stock analysts must feel about now -- it all depends!
Problem is, what it depends on is a moving target and seems to
change from day to day."
That seems to be the consensus among retailers who responded to CLN's
unscientific survey conducted last week. Among the conclusions:
Economy. Respondents from across the country say their local
economy is hurting. (Not one respondent said his/her local economy
was strong -- possibly an ominous sign for President Bush's
reelection chances.)
In previous hard times, that has meant increased craft sales, but
perhaps not this time. One retailer thinks he knows why: "I
think the answer lies in the shift we have all made over the past
few years from strictly crafts to a strong emphasis on home decor.
The home decor industry or gift industry has traditionally been one
of the hardest hit when the economy goes south, and with our
emphasis on home dec, it makes sense that the impact on sales would
be negative."
One exception may be scrapbooking. "Although our economy isn't
good," one memory retailer says, "[scrapbooking] makes
people turn inward and look at what's important in their lives --
family, history, leaving a legacy. Women looking for a not-too-pricey
way to reward themselves can do it here and feel good about what
they're spending on, since it's not JUST for them -- it's to give or
share with someone else."
National Predictions. All sorts of marketing groups have
surveyed consumers regarding their spending plans for the holidays.
The latest study from Brand Keys, a N.Y. consumer research company,
indicates consumers plan to spend about $710 on the holidays this
year, an increase of about 9%.
The National Retail Federation (an association of large chains)
predicts a 5.7% sales increase for November and December, and none
of the industry-related chains have raised or lowered their
sales/earnings expectations for the fourth quarter.
The consulting group Retail Forward predicts sales to be 3.5%-4.0%
better this year; that's a one-half to one percentage point
improvement over a year ago.
There is some negative news, however. A survey from the National
Retail Federation indicates consumers plan to spend slightly less on
Halloween. Survey respondents will spend $41.77 each this year, down
from $44.20 last year.
Gifts don't fare well, either. A study by Unity Marketing indicates
that the gifts and decorative accents industry is in its second year
of declining sales. Sales dipped 1% to $54.3 billion in 2002.
According to Unity President and ACCI speaker Pam Danziger,
"The industry's biggest challenge is that many of the products
it sells and the way it sells them, primarily through small
specialty gift stores, do not connect with the consumers." Two
bright spots Danziger sees: holiday decorating and scrapbooking.
Industry Predictions. "I think the fourth quarter will
be OK," one industry pro (who's usually accurate) told CLN.
"It looks like spending is holding up, but I am not sure the
craft stores will be the main focus this year. The chains with the
best systems have the best chance, because they will be better at
having the right merchandise in the right place at the right time. Jo-Ann's
seems poised for a strong fourth quarter, and I assume A. C.
Moore will do OK as well."
Wal-Mart reported it anticipates a "modest
improvement" in holiday sales.
Most independents surveyed experienced a mediocre fourth quarter in
2002 and expect only a small increase this year.
Still, there may be signs of a better-than-expected season. One
importer said, "We have recently seen a bit of a trend from
customers calling to inquire if we have extra inventory available
from the import program. (We do not stock extra, so any availability
comes from credit problems, store closings, etc.). That is the
indication I have been waiting for -- that the economy is turning
around a bit, consumers are beginning to buy, and the retailer
suddenly realizes his conservative buying attitude back in early
spring for this season is not working."
Prices. Fourth-quarter sales increases may not result in a
comparable rise in profits. One retailer said, "Our sales will
be the same or a little better this year, but we'll have to reduce
prices to achieve it -- damn!"
Another retailer expressed concern about Michaels increasing
its ad coupon from 40% to 50% off any one item. "As big as they
have become, this does impact the consumer thinking about craft
stores in general. If their new standard is to become 50% off, we,
as well as they, are in for a rough ride in the fourth quarter,
because no more business will be stimulated by this action, but
overall lower sales and lower margins will result."
Products. "Consumer interest is strongest in the better
quality goods. Yarn is just one example where nearly all the sales
are coming in lines that were not even carried in most craft stores
just two years ago -- and the tickets are much, much higher on these
items." Higher-end beads was cited as another example, as was
collectible ornaments.
Look for increased sales of seasonal decorations, too, says Pam
Danziger of Unity Marketing. Unity's latest study indicates sales of
Christmas/seasonal decorations rose 6% to $4.65 billion last year,
although Halloween decorations dropped.
Categories. Scrapbooking, beading/jewelrymaking, yarn, and
fabrics are expected to remain strong. Painting (in some areas),
soft crafts, and florals are shaky. Custom framing is a puzzle to
some retailers; it remains strong, despite the tough economy.
THE RICHEST MAN IN THE CRAFT
INDUSTRY
The new, annual Forbes 400 list of the richest people in
America not only includes a craft retailer, but is an interesting
tortoise-and-hare story.
On the list for the first time is David Green, head of Hobby
Lobby, with a net worth of $1.1 billion, Forbes reported.
Quite a success story, given that David opened his first store as an
independent retailer in 1972; now Hobby Lobby is 249th on Forbes
list of largest privately held companies. The chain -- and David --
would probably be even richer if the stores were open on Sunday, but
David's strong religious beliefs preclude that.
What makes it a tortoise/hare story is another familiar name on the
list, Sam Wyly. Sam and his brother Charles sit on the board of Michaels
and are major stockholders. Forbes says Sam's wealth is $970
million. Sam started with a lot more money than David, but now....
SPECIAL REPORT, I: JOBS IN
AMERICA
The good citizens of Galesburg, Illinois probably won't be buying
many craft supplies in the near future. Maytag, the largest employer
in this Central Illinois town of 35,000, is moving to Mexico, laying
off 1,800 workers in the process.
Lincoln, a Central Illinois town of 17,000, has seen its two largest
employers disappear. Lehn & Fink (makers of Lysol) closed
its plant, and the near-bankrupt State of Illinois shut down a
wonderful institution for the severely disabled in an effort to
balance the budget.
Meanwhile the Timken Company, an Ohio steel manufacturer where the
President launched his "Jobs and Growth" plan in April,
announced last month it was cutting 900 jobs.
As Bruce Springsteen sang, "These jobs are goin', boys, and
they ain't comin' back," -- at least for good paying factory
jobs.
The same story seems to be happening around the country, judging
from the reports from CLN subscribers (see "The Outlook
for the Fourth Quarter," above). Since February 2001, private
employment has declined by 3.3 million jobs, reports the Labor
Department.
The economy seems to be picking up, but it's what economists are
calling a "jobless recovery," despite the signs of
improvement indicated in Friday's Labor Department report. Part of
it is due to increased productivity, according to Jeffrey Gartner,
former head of IBM and now Dean of the Yale School of Management.
But another part is "the explosive growth of outsourcing to
China, India, and elsewhere," he wrote in Business Week.
Senator Fritz Hollings (D-S.C.) thinks he knows the problem.
"We are in a position where we do not make anything any
more." Hollings blames U.S. free-trade policies of recent years
-- all supported enthusiastically by the National Retail Federation,
the U.S. Chamber of Commerce, and the National Federation of
Independent Business -- who are enamored with the short-term profits
caused in part by cheaper labor costs overseas.
Many economists argue that free trade allows each country to do what
it does best, and the resulting increased efficiency boosts every
nation's economy. The theory is good, but the recent collapse of the
World Trade Organization talks shows the reality is far different.
The result is an uneven world system that encourages U.S.
manufacturers to move overseas, leaving the U.S. as an
"information processing" society, although many of those
jobs are being outsourced, too.
Meanwhile, retailers in all industries continue to pressure U.S.
vendors to lower their prices. That's an entirely successful
short-term strategy. But if the end result is high unemployment,
who's going to buy our products?
Newsweek's Economics Editor Robert Samuelson wrote,
"Once the [tax cut] stimulus fades, the economy will need
higher employment to generate higher consumer spending."
SPECIAL REPORT, II: JOBS ...
AND WAL-MART
You cannot talk about jobs without talking about the country's
largest employer, Wal-Mart. The company will surpass $300 billion in
sales this year, and sells to 138 million consumers each week.
Four-fifths of all U.S. households are shopping at one or more of
its 3,473 stores, according to Business Week.
Meanwhile, Wal-Mart's incredible growth continues. President/CEO Lee
Scott recently announced plans to open another 50-55 stores, 220-230
supercenters, 35-40 Sam's Clubs, and 25-30 Neighborhood Markets --
about 50 million sq. ft. of retail space -- in 2004 alone.
The company already employs 1.4 million people worldwide. The
problem is, employees are paid at a level that keeps them below the
federal government's poverty line. (That's probably true of many
retailers.) Consumers below the poverty level can't afford many
craft supplies.
Wal-Mart is a job creator, but a job destroyer, too. There's no way
of counting how many people have lot their jobs because Wal-Mart has
driven competitors out of business, or the number of factory workers
whose employer switched operations to the Asia.
The company's new emphasis is on opening supercenters, which the
consulting firm Retail Forward predicts will triple in sales by
2010. That prediction may be low; according to Business Week;
supercenter grocery prices average 14% less than in traditional
supermarkets, which are often unionized and pay higher wages. The
result: two supermarkets close for each new supercenter that opens.
The discounter's wage structure may change. Last month a San
Francisco judge heard arguments in favor of combining six lawsuits
accusing Wal-Mart of wage/sex discrimination into a class-action
suit that would affect 1.6 million+ current and former female
employees. If it becomes a class-action suit, and the women win, the
cost to Wal-Mart could be in the billions.
But it won't happen anytime soon. Wal-Mart told the judge if he
rules in favor of a class-action suit, the company will seek
testimony from 4,000 store managers, resulting in a trial that would
last 13 years, according to Progressive Grocer magazine.
No word on when the judge will make his decision. Meanwhile, the
company's "Everyday low prices" philosophy remains.
"[The slogan] is a fundamental tenet of a cult masquerading as
a company," wrote Business Week. "Over the years,
Wal-Mart has relentlessly wrung tens of billions of dollars in cost
efficiencies out of the retail supply chain, passing the larger part
of the savings along to shoppers as bargain prices."
(Note: To read an excellent article on Wal-Mart's effect on
the economy, click HERE.)
A.C. MOORE: ON TRACK
For the third quarter ended Sept. 30, sales rose 9.9% to $98.6
million and same-store sales increased 2%. For the year, sales are
up 10% to $284.2 million and same-store sales grew 1%.
CEO Jack Parker said, "We saw momentum build throughout the
quarter with September, the most important month of the quarter,
being the strongest despite the effects of Hurricane Isabel. With
our plans fully in place, we are well positioned to maximize sales
and profit in the fourth quarter. We anticipate that our profits for
the third quarter will meet consensus expectations and we maintain
our forecast for the full year to be at the high end of the $0.84 -
$0.88/share range."
Third quarter earnings will be released this Wednesday. The current
store count is 78.
CRAFT STOCKS ARE WINNERS IN
THIRD QUARTER
Craft stocks more than doubled the performance of the Dow in the
third quarter. Apparently Wall Street thinks a national economic
recovery has finally begun and the craft industry will lead the way.
CLN's Retail Index rose 6.5% during July-September, while the
Dow gained 3.2%.
Rag Shops led the way with a stock price increase of 18.7%. A.C.
Moore and Jo-Ann's had double-digit gains of 11.3% and
10.6% respectively. Michaels increased 6.7%. Wal-Mart,
beset with publicity concerning its sex discrimination lawsuit (see
above), gained 4.3%. The only CLN Index stock to slip was
Hancock, down 1.5%. (Note: All figures are exclusive of
dividends.) Other stocks of interest:
Martha Stewart, whose trial is to begin early next year,
dropped 1.6%. Target, Wal-Mart's main competitor, dipped
0.7%. Duckwall-ALCO, which hasn't listed crafts as one of its
better categories in months, was up 31.8%. ShopKo, whose Pamida
division sold crafts, rose 16.6%. There are two publicly held
publishers with various industry magazines: Primedia dropped
12.5%, while Meredith (Better Homes & Gardens) rose 4.6%.
Craft stocks have drastically outperformed the Dow for the first
nine months of 2003, too. The CLN Retail Index is up 22.7%
for the year, while the Dow has increased 11.2%. A.C. Moore is the
big winner, up 76.2%. Michaels rose 29.7%, Jo-Ann's is up 21.8%, and
Rag Shops increased 21.4%. Wal-Mart is up 10.8% and Hancock has
risen 4.3%.
For the year: Duckwall-ALCO, +30.6% ... Primedia, +29.6% ... Target,
+25.3% ... ShopKo, +21.8% ... Meredith, +12.0%. Only Martha Stewart
dropped, 6.4%.
HIA SHOW-RELATED EVENTS
There will be lots of them -- here's just a start:
1. The HIA Foundation is accepting sponsorships for
the 2004 charity golf tournament on Tues., Feb. 3rd at the Four
Seasons Resort and Club at Las Colinas. The tournament will benefit
the School, Home & Office Products Assn. (SHOPA)
Foundation's Kids in Need Resource Centers, which provide
free school supplies to poor students and under-funded teachers. The
2003 event raised $15,000. Various levels of sponsorship are
available. For sponsorship info, email Don Meyer at dmeyer@hobby.org.
2. HIA will feature its first Designers Gallery at the
show Feb. 5-8 in Dallas. If a project is selected, it will be
displayed in the Designer Gallery display case near the
entrance to the show, and the designer will have a listing in the
program guide.
Participating designers are expected to work with products available
from HIA members, have paid their 2004 dues, and be current members
of HIA's Designers Section. There is a $25 entry fee. For more info,
designers contact co-chairs Susan Lowenthal (203-227-3343, susan@bysusandesigns.com)
or Michele Emerson-Roberts (520-378-1176, michelesdesigns@msn.com).
To submit projects contact Patsy Moreland (503-760-1816, fiberworksnw@juno.com).
RANDOM NOTES, RANDOM THOUGHTS
1.The following was emailed from a very successful,
influential independent, as part of his response to CLN's
survey about the fourth quarter. It's a classic example of the
difficulty in trying to serve two masters.
"It seems that the large manufacturers are digging themselves a
huge grave from which I see no quick recovery. Our number one line
in a major category has been XXX for many years. Michaels has
always been higher than us on this line, but this summer and again
this fall they ran the same item for less than our cost. Guess where
our commitment to XXX has gone? They certainly did not offer us any
kind of special deals like that, and I know Michaels is not running
loss leaders.
"A number of craft manufacturers are offering similar good
deals to the chains, but not to the independents, and our response
continues to be the same each time: if you cannot treat us fairly,
then we don't intend to continue promoting your brands -- and in
fact, have eliminated most of them.
"I guess it is a matter of choice, but what the manufacturer
does not realize is consumers have little brand loyalty and buy what
we offer them. If we don't carry XXX's line, but offer another
brand, they'll buy what we carry."
2. Designer Leslie Frederick wrote: "As a writer,
designer and teacher, I found your articles on getting the creative
juices flowing very interesting." (Note: To read the
original columns, visit www.clnonline.com and click on Business-Wise
and Kate's Collage, then on the appropriate title in the right-hand
column.)
"One of my favorite creative outlets is to head to my local
book store. There an hour or two spent in the magazine section is
often enough to get me out of my creative slump. Whether it's
sitting with a cup of coffee and absorbing the conversations around
me, or viewing a different perspective in a magazine or book, I
always seem to come back able to see the task at hand with freshness
not available previously. It's my creative secret that I've heard
others say works for them as well."
MISCELLANEOUS NEWS
SCRAPBOOKING.CLN has received reports that the MemoryTrends
show in Las Vegas was excellent, despite some mix-ups on class
tickets. The number of exhibitors and attendees was up substantially
from last year.
QUOTATION: "[Scrapbooking is] the strongest growth
category in the business. Nothing comes in a close second." --
Stacey Gough, Jo-Ann's (Akron Beacon Journal)
NEWSLETTERS. Trend guru Kathy Lamancusa's free Trend Talk
email newsletter has returned. An interesting item in the new issue:
"The current rage for retro- and nostalgia-inspired fashions,
gifts, and decorative accessories has spawned a demand for black and
white photography," Kathy says, and adds that J.C. Penney and
Sears now include b&w portraits in their photo package options.
Sears reports that 10% of its customers request b&w portraits,
and sales of Konica's disposable b&w camera have almost tripled
since its introduction a year ago, Kathy reports. Visit www.lamancusa.com
and click "Free Newsletters."
PAINTING. Members of the Society of Decorative Painters
have a new perk: A 10%-off discount card to Jo-Ann's stores.
Deadline for renewing and prospective members to save $5 on 2004
membership is Dec. 1. Visit www.decorativepainters.org
or call 316-269-9300, ext. 105.
MEDIA. The premier issue of Simply Creative Crochet
goes on sale tomorrow. It's published by Better Homes &
Gardens Craft Division and Spinrite. It's $5.99 with
about four dozen color projects, from accessories for teens to baby
gifts, apparel, and home accents.
NEEDLEWORK. TNNA is sponsoring a second NeedleArts
class to Fashion Design and Merchandising students at Kent State U.
in Kent, OH after the highly successful first class. The class will
offer hands-on instruction in needlepoint, embroidery, cross-stitch,
knitting, crochet, etc. TNNA guest instructors include: Carol Gantz
(Associated Talents), Elisabeth Ryan (Stitches, Etc.),
Gwen Blakely Kinsler (Fiber Impressions/Get Away with Crochet),
Nancy Brown, Marnie Ritter, Becca Smith (Smith Int./Bag Smith),
and Liz Tekus (Fine Points).
INDEPENDENTS. To read some interesting advice on competing
against the chains, click HERE.
TNNA. Look for The National Needlework Association to
change its name to The National NeedleArts Association. Officials
say it's a more modern and marketable name.
AWARDS. Michaels gave its annual Partnership Awards to
The Paper Co., Polytree, Provo Craft, and Delta
... Spinrite won A.C. Moore's New Product Innovation
award. Spinrite manufactures Phentex, Bernat, Lily,
and Patonscrochet and knitting yarns.
PEOPLE, I. Best wishes to Jack Busby, Jr., 60, President/COO,
who will retire from Hancock effective Feb. 1. He joined
Hancock in 1966 as Store Manager in Gulfport, Mississippi. James
Austin, 49, Exec VP-Operations, will become COO effective with Mr.
Busby's retirement ... Crafter's Home named Patricia Hansen
Director of Sales/Marketing.
PEOPLE, II. Dollar Tree , the nation's largest $1 discount
variety store chain with 2,468 stores, promoted former Michaels
exec Bob Sasser to CEO. Sasser joined the company in 1999 and was
promoted to president in 2001.
DIVIDENDS. Michaels declared a quarterly cash dividend of
$0.10/share, payable Oct. 31 to shareholders of record Oct. 15 ... Hancock
declared a cash dividend of $0.10/share on the outstanding common
shares, payable Oct. 15 to shareholders of record Oct. 1.
2004. Some show dates: TNNA, Long Beach, Jan. 31-Feb.
2 ...TNNA/INRG, Columbus, OH. June 12-14 ... Art Glass,
Portland, OR, July 9-11 ... TNNA, Phoenix, Aug. 29-30 ... Society
of Craft Designers Seminar, Albuquerque, Sept. 8-11. The 2004 ACCI
show, which may be the C&HA's summer show if the ACCI/HIA
merger is approved, is July 16-18. Call 999-360-2224 for info on
these shows, or visit the websites.
BUSINESS PROFILE
Many of the industry's leading companies have been profiled in
CLN. A partial list: Manufacturers. Accu-Cut Systems ...
Armada ... Bagworks ... Colorbok ... Ellison Craft & Design ...
Floracraft ... Jack Dempsey Needle Art ... Krylon ... MagEyes ...
Plaid ... Prym-Dritz ... PSX ... Walnut Hollow ... Yaley
Enterprises.
Retailers. Wal-Mart.
Associations. ACCI ... Art Glass Association ... Offinger
Management Company ... Society of Craft Designers.
Service Companies. Corporate Finance Associates ... Images
... Tradewinds.
Note: To learn more about how your company can be profiled in
CLN, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.
To read other profiles, click on "Business Profile
Archives" in the right-hand column. Profiles remain in the
Archives for one year; each time a profiled company is mentioned in
a subsequent issue, it will be linked to the profile.
THE CREATIVE NETWORK: JOB
OPENINGS
To see a sampling of the current job openings and to contact The
Creative Network, click on the "Jobs" button in the left
hand column.
THE CLN RETAIL INDEX
A. C. Moore (ACMR). Last*: 23.66 ... Change**: -0.37
Hancock Fabrics (HKF). Last*: 15.84 ... Change**: -1.16
Jo-Ann Stores (JAS.A) [a]. Last*: 29.21 ... Change**: +0.07
Michaels (MIK). Last*: 43.03 ... Change**: -0.50
Rag Shops (RAGS). Last*: 4.08 ... Change**: -0.41
Wal-Mart (WMT). Last*: 57.48 ... Change**: UNC
CLN Retail Index. Last*: 100.50 ... Change**: -1.3%
Dow Jones Index. Last*: 9,572.31 ... Change**: +1.1%
*Oct 3 ** from Sept. 12 [a] voting share Prices are exclusive of
dividends
WASHING CLOTHES
(Note: This was emailed from a subscriber)
Years ago a Kentucky grandmother gave the new bride the following
recipe for washing clothes. It appears just as it was written, and
despite the spelling, it has a bit of philosophy.
1. Bilt fire in backyard to heat kettle of rain water.
2. Set tubs so smoke wont blow in eyes if wind is pert.
3. Shave one hole cake of lie soap in bilin water.
4. Sort things, make 3 piles. 1 pile white, 1 pile colored, 1 pile
work britches and rags.
5. To make starch, stir flour in cool water to smooth, then thin
down with bilin water.
6. Take white things, rub dirty spots on board, scrub hard, and then
bile. Rub colored don't bile, just rinch and starch.
7. Take things out of kettle with broomstick handle, then rinch, and
starch.
8. Hang old rags on fence.
9. Spread tea towels on grass.
10. Pore rinch water in flower bed.
11. Scrub porch with hot soapy water.
12. Turn tubs upside down.
13. Go put on clean dress, smooth hair with hair combs. Brew cup of
tea, sit and rock a spell and count your blessings.
Paste this over your washer and dryer, and next time when you think
things are bleak, read it again and give thanks for your blessings.
REMINDERS
1. For more information on how your business can be the
subject of a "Business Profile" or have products/photos
included in the "CLN's Online Product Preview, call Mike
Hartnett at 309-925-5593 or email mike@clnonline.com.
2. 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.
3. If you want a hard-copy of this issue, click on
"Printer Friendly version".
4. If your company is a paid subscriber, everyone in the main
office is welcome to register, free. Just click on "Current
Subscribers Click Here To Register."
5. If you want to recommend CLN to a friend, use the
"Tell Your Friends" box on the home page.
6. Creative Leisure News is published on the first and
third Mondays of each month. Your next issue will be Monday, October
20.
xxx
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