Date: August 17, 2009
Vol. XII, No. 16

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TABLE OF CONTENTS

COMMENTARY: ATTRACTING NEW CUSTOMERS 

Rob Bostick of Judikins tried to partner with a Florida store to exhibit at the CHA Supershow, "but they all refused to support the show in the hope that it would go away." Rob did partner with Queen's Ink, a store in Baltimore. The result? He was so busy he never left the booth.

Talk about short-sighted retailers. Apart from losing sales, the retailers who didn't support the show lost an opportunity to create new customers. The majority of the visitors to the booth, Rob said, were new to stamping.

"Stamping as a hobby is now 30+ years old and there is a general belief among stamp makers and stores that anyone who wants to stamp already is." said Rob. He just returned from the Cincinnati StampAway show, the largest stamp convention east of the Rockies. "The other StampAway vendors could not believe my report that most of our SuperShow customers were beginners or brand new to stamping."

The wonderful thing about the SuperShow, apart from the rampant enthusiasm from just about everyone, was knitters making a bracelet, scrapbookers getting a knitting lesson, and so on. Who knows why many of the consumers attended the show, but many discovered stamping.

Consumers may want to try a category, but don't know if they'll like it, so they won't sign up for a store's class. They may not even know that a store teaches classes. But if they're attending a consumer show, and they see an interesting make-it/take-it, they'll sit down and try it. And if they like it, then they'll spend money.

Kizer & Bender. How can you build your business into a brand? Some simple, straightforward suggestions.

Business-Wise. So what does "Green" really mean? And what should it mean? A thought provoking analysis by Joel Goobich, President of i3 Marketing, a product development, marketing, and consulting firm that specializes in art materials.

Scene & Heard. Maria Nerius' analysis of the CHA Summer trade and consumer shows.

Category Reports. The August issue of Yarn Market News, now available at www.yarnmarketnews.com, asked retailers about the state of their business. Excerpts are here.

Memory, Paper & Stamps. Excerpts from Nancy Nally's Scrapbook Update report on changing business trends by scrapbook exhibitors at the CHA Summer Show.

(Note: If a column is not what you expected, click on the Reload or Refresh button of your browser.)

The stock market is booming, the job losses are slowing, and housing sales are up, even if the prices are not. Economists are reporting the recession has hit bottom and the recovery has begun, although job growth will lag behind other economic indicators. Oh? Has the economic decline stopped? What are you seeing in your community? To vote, click on Industry Polls in the right-hand column or click HERE.

Almost a third, 32.7%, of the attendees and exhibitors at the CHA and/or TNNA summer shows said they were "very pleased" and the experience was worth the cost. Another 23.1% weren't as enthusiastic, but were pleased. But 17.3% were "somewhat displeased" and 21.2% said they were "very displeased." Only 5.8% weren't sure one way or another. 

A.C. MOORE: "WE ARE NOT SATISFIED"

Sales for the second quarter ended July 4 declined 17.4% from a year ago, due to operating six fewer stores and a drop in same-store sales of 13.8%. Net loss for the quarter was $8.1 million ($0.38/share), compared with a net loss of $4.3 million ($0.21) a year ago. Second quarter 2008 results include charges of $0.07/share. Four analysts polled by Thomson Reuters expected the company to report a loss of $0.23 per share.

Sales for the first two quarters of the fiscal year were down 15.8% to $213.1 million, Same-store sales declined 3.6%. Net loss for the first half of the year was $12.5 million ($0.60) compared with a net loss of $6.0 million ($0.30) a year ago. 2008 results include charges $0.07/share.

CEO Rick Lepley said, "While we are not satisfied with the results for the second quarter, revenue was in line with our expectations. We continue to focus on driving sales and are pleased with the results of our initiatives to manage inventory, enhance our supply chain systems, and improve our cash position."

The company hosted a conference call last Thursday. A replay of the call is available until midnight this Thursday. Call 800-642-1687 and enter pin #98363393.

Net sales for the second quarter ended Aug. 1 rose 4.1% to $419.4, and same-store sales increased 1.8%. For the first half of the fiscal year, sales were $879.4 million versus $849.1 million a year ago. Year-to-date same-store sales rose 1.4%.

The company will report earnings for its second quarter on Aug. 26.

Michaels' net sales for the quarter ended Aug. 1 rose 1.4% to $807 million. Same-store sales declined 0.8%, due to a 7.0% decrease in average ticket and a 6.2% increase in transactions. In other words, consumers are crafting more, but spending less per customer. Canadian currency translation adversely affected same-store sales by approximately 100 basis points.

Net sales for the first two quarters of the fiscal year increased 1.0% to $1.659 billion, but same-store sales declined 1.4% for the same reasons: a 5.2% decrease in average ticket, a 4.0% increase in transactions, and a negative 0.2% impact from deferred custom framing revenue. Canadian currency translation adversely affected same-store sales for the first six months of fiscal 2009 by approximately 130 basis points.

The company expects to report second quarter earnings on Aug. 25.

Attendance. The trade show attracted about 5,000 attendees, down from about 7,100 a year ago, but the number of participating retail companies increased by 5%. (More stores but they brought fewer people.) Approximately 9,000 admission tickets were sold (5,000 in advance and 4,000 onsite) for the consumer show. About 78% were from Florida, but the others were from 48 states and 18 countries.

Dates. The 2010 Winter Show will return to Anaheim Jan. 24-27. The deadline for submitting a workshop application is Aug. 28. Visit https://www.chashow.org/eweb/docs/2009sshow/CHA_2010_Winter_Workshop_Form.pdf. CHA is also offering early-bird special prices for exhibitors who sign a contract by Fri., Sept. 18. They will pay $15.75/sq. ft. After the 18th it's $16.25. Visit www.chashow.org.

Quotation. "As a designer, I thought the Designer Showcase [at the CHA Summer Show] was in a perfect spot directly across from the entrance to the show, and had the best attendance in the past five years with over 150 distributors, publishers, and press members walking through. I made several solid contacts and had interest in a couple of designs right from my showcase table." – Beth Watson, Beth Watson Design Studio, beth@bwdesignstudio.com

Reviews. Industry veteran Julie McGuffee's blog, www.juliemcguffee.blogspot.com, has photos and comments about the trade show. Julie is host of the PBS series, Scrapbook Memories, and the blog contains photos and comments about filming the next series. Scroll to the Aug. 2 entry. ... Scrapbook Update has an extensive report on the show's trends and products. Visit www.scrapbookupdate.com. To read more, visit Scene & Heard and Memory, Paper & Stamps.

WILTON AVOIDS BANKRUPTCY

Wilton Holdings, the parent of Wilton, EK Success, Dimensions, and others, reached an agreement in principle with its largest creditors, JGF Credit and Deutsche Bank Trust Co. Americas, regarding a comprehensive restructuring of Wilton Holdings' capital structure. The parties agreed to a continued period of forbearance during which they will work to effect the financial restructuring on terms that have been mutually agreed upon. As part of the agreement, the creditors agreed to "stand still" regarding their involuntary bankruptcy petition and withdraw the petition when the financial restructuring is complete.

A company press release stated, "The day-to-day operations of Wilton Brands continue to be unaffected and the Company’s management team continues to focus on running the business in the ordinary course and delivering great products and quality service to its customers."

1. So far we are doing okay! Our sales have tracked up for the year, and we're budgeting for that through the end of the year. We're ahead of both 2007 and 2008 to date and intend to keep it that way!

Our consumers are focused on hand-made gifting. We made a point of encouraging that through the last half of 2008 and have continued with that this year. Our blog focuses on all sorts of crafting every day – a new blog each day.

From what we can see, the hard core enthusiasts are using their stash, but they're also supplementing! I've heard comments from some about comparisons to "big boys' toys" and the $s are still being spent on those, so....!

Our yarn, scrapbooking, beading, and hard crafts departments have all experienced consistent increases. The only real softening we've seen is in the floral/home décor and custom framing categories. Candles (Yankee specifically) are down. They've priced themselves way too high, and have not dropped any prices as the price of oil has dropped significantly. – Name Withheld (store in the Northwest)

2. Dick Broecker, who has operated Erica's Craft and Sewing Center in South Bend, IN with his family for 35 years, reports sales are up about 2%; traffic is up in the store and online, but sewing machine sales, especially of the high-end machines, are down, and the average sale is down. He thinks the trend will continue through the year.

Promotions remain important, Dick says, pointing to the store's two-day 35th anniversary celebration that attracted 600+ people. The store also has been exhibiting at consumer shows and picked up 350+ new customers at one of them.

3. Our classes are full, events are full, and guests are still focused on stashes and what they can use up. This is true even for new patterns and new colors; they want the new items – and how much can they use from what they already own.

Maybe California is a more extreme case? News here is continuous bad news with focus on the state budget, layoffs of large numbers of teachers and state workers, and the glut of houses and commercial space. Other news includes the cutbacks at the ports, big layoffs in the container distribution centers inland, and so on. Locally the chamber of commerce talk is of difficulty in getting any kind of business loan. – Name Withheld

4. I believe we are past the worst of the profit declines and see a pretty decent upside for the balance of the year. Saying that though, when one is up against prior numbers, a 20% increase over nothing is still nothing for those who struggled through last fall and winter.

Specifically for us, there has been an increase in customer count every month this year, which we take to mean that our consumers are still very interested in what we do and what we have to offer. Offsetting that is a considerable decline in average size of purchase, so we find ourselves in a direct conflict: having more customers is great and we welcome each and every one, but to deal with more traffic with smaller transactions means more costs on each transaction.

People are saving money any way they can, and that bodes well for the entire craft industry – if we take care of their needs. For example, we are seeing a significant upgrade in consumer demand for quality product versus the low-end things that many manufacturers have been producing as "value" products.

Junk is junk to most consumers, and offerings of low-end goods in beads, frames, craft materials, and yarns have been routinely rejected by our customers. They want their value goods to be quality.

Add to that the true average transaction costs being north of $12, and it takes a heck of a lot of $1.00 items (even at a 60% margin) to turn a profit. We would rather sell four $10 items at a 50% margin than 40 $1.00 items at a 60% margin because, while the gross profit dollars are higher with the $1.00 items, the transaction costs related to that sale are far higher. Show me the money – on the bottom line please!

What to do? Margins flat to down, average sale down, traffic and expenses up. It is certainly a challenge that will separate the players from the pretenders.

Are the consumers still using their stash? I don't think they ever were. As always, consumers want the newest products and the newest ideas first, and if we don't have them available they are not motivated to buy much of anything. Craft store customers visit their favorite store primarily to see the newest of ideas, products, and inspirations. Absent those things, even the basics drop.

Yarn? Sales are hot once again, even with the summer slow period. Seasonal yarns and the newest of the new, as well as basic standbys like sugar and cream cotton yarns, are doing extremely well. We see some pretty significant increases over last year's yarn sales in the coming fall season.

Beading? I hear it depends on your product offerings with some stores reporting declines and others flat. We are on fire with this category with sales in June higher than last November. Once again can you say NEW? What was hot in May is not hot in July and what is hot today will not be hot in October. Glass for the most part is dead except Swarovski, naturals are great, and high-quality findings are off the charts. Unique is where it's at. Price is not the object, and quality and fresh looks are home runs.

Scrapbooking? Flat but steady. We are not seeing the huge losses being reported by so many. Are we just lucky? We have over 500 linear feet for this category so we are dominant if nothing else. Stickers are slowing, paper is good as long as it is the newest, tools are good as long as they are inexpensive, and card making is still on fire if the products are the newest. Our mousetrap is the free use of die cuts machines and the dies – we have over 1,000 to choose from. The rest of the world can fight it out for the 10-25% margins on the home machines. We ain't playin' that game.

Crafts? Crafts are the #1 growth category for us. A few years ago many craft stores cut back or even eliminated the hard crafts categories of paint, plaster, mache, clay, etc. While the category may have only been producing 10-20% of a stores volume, it was pulling 30-40% of a craft store's traffic.

Don't use my name. Michaels is sniffing around and I am fearful they will get too many ideas. – Name Withheld

We have been seeing a shift to distributors vs. the retailers buying direct. It just seems that replenishing in small quantities, just in time, is allowing the retailers of all sizes to keep customers happy while continuing to reduce inventories. This has been a happening all year, but we have only recently seen the effect in our sales due to the overall impact of the retailer inventory reduction efforts.

Retailers seem recently upbeat. Perhaps they are just tired of being down in dumps. At any rate my sense is that back-to-school and Holiday will be ok, but because of all the retailer caution out there, we will see a lot of late and therefore rush orders.

Consumers seem equally cautious. Everyone is squeezing the last drop of paint out of their existing tubes. Are the consumers doing as much art? My guess is yes. In the scheme of things, it is very cheap and very satisfying to create things. One thing that consumers are responding to right now are significant promotions on regular items and categories. We've seen annual sales events at specific stores exceed last year by 20% when advertised properly. – Frank Stapleton, MacPherson's

The feeling I'm getting from retailers and wholesalers alike is, in a word, mixed. A lot seems to depend on their location, but a lot seems to depend on the attitude of the retailers and their willingness to work harder to create reasons to bring people into their stores.

Shoppers across the board are more conscious of expenditures, using credit cards less, and turning to their stashes. More and more shops are branching out and taking booths at consumer shows like Stitches, fiber fairs, and events like recent Sock Summit to build their customer base and be in the path of the hardcore yarn consumers. In addition, special events and getting "celebrity" knitters and authors into shops seem to draw in customers and stimulate sales. – Karin Strom, Editor of Yarn Market News

(Note: YMN posed similar questions to Karin's readers. The answers are in YMN's August issue, available at www.yarnmarketnews.com and some excerpts are in Category Reports.)

Here are three recent examples of optimism in these scary economic times.

1. Buying a Company. Betsy Perry acquired Classic Elite Yarns from the estate of the previous owner, Patricia Chew. Perry had been VP of Sales for the company and serves on the TNNA Board of Directors and the Advisory Committee of Yarn Market News. "The staff remains the same, loyal to our brand and to our mission," Betsy said. "All of us have been with the company for a while, so we understand the business, know and appreciate our partners and customers, and are committed to continuing to provide outstanding customer support and design services while exploring new and exciting product offerings." Visit www.classiceliteyarns.com, call 978-453-2837, or email info@classiceliteyarns.com.

2. Launching a company. Every trade show seems to have one exhibitor who was the "talk" of the show. In Orlando it was Nikki Sivils, Scrapbooker, a company started only a few months ago. The company offers a wide variety of memory products and Nikki told CLN the booth was busy the entire time. Visit www.nikkisivils.com or email nikki@nikkisivils.com.

3. Opening a store. Licia Parella-Britton opened a needlework shop, Uncommon Threads, in Newburyport, MA on May 1, and is already looking to expand, The Newburyport Current reported. A former exec in the financial services industry in Boston, Licia said, "I’m much happier now. It all has come full circle. I started with a predisposition for art, but got an MBA so I could support my family and live comfortably."

Apparently Betsy, Nikki, and Licia are not listening to all the gloom-and-doom talk that is so prevalent.

The changing demographics of our generations are about to bring many challenges for companies trying to best tap into and utilize the talent and skill of the youngest generation, while retaining the key seasoned talent already in place. Generation X presents a much smaller pool of available workers and will not fill the positions left vacant by retirements. By the end of 2009, the pool of available 25-44 year old workers will have decreased by 7% from the level five years ago. This will result in a significant labor shortage. In fact, EVERY YEAR for the next 30 years, there will be fewer younger people to replace retiring workers.

I am currently reading two books that address this situation and more. I would recommend them for any company that will be hiring in the future. 1. From Boomers to Bloggers: Success strategies across generations, by Misti Burmeister, published by Synergy Press. 2. Bridging the Generation Gap: How to get Radio Babies, Boomers, Gen Xers and Gen Yers to work together and achieve more, by Linda Gravett and Robin Throckmorton. – Gail Czech, The Creative Network

A retailer in Texas wrote complaining about the latest heat wave, and said the high temperatures hurts sales. I guess every part of the country has a weather problem. I know a retailer in upstate New York who assumes he'll lose at least a week of sales every winter to snowstorms, and a retailer in the cloudy Northwest who hates it when the sun shines because customers enjoy outside activities rather than shop, and Midwestern retailers dislike early spring because some consumers garden rather than craft, knit, stitch, paint, etc.

JULY SALES. Lousy. Some same-store sales figures: TJX, +4.0% ... Ross Stores, +4.0%, B'J's, +1.6% ... Kohl's, +0.4% ... Costco, -2.0% ... Target, -6.5% ... Gap, -8.0% ... Macy's, -10.7% ... JC Penney, -12.3% ... Saks, -16.3%. Overall consumer spending declined 0.1%, the government reported, despite the "cash for clunkers" program. Look for August numbers to be lousy, too, because Labor Day is Sept. 7 this year compared to Sept. 1 in 2008. End-of-summer promotions usually occur over the Labor Day weekend, so those sales will happen in September, not August.

CRICUT. Home Depot now carries the Cricut Expression Home Decor Bundle and some accessories on its website, Scrapbook Update reported. The focus is on the machine’s wall decor capabilities.

SCRAPBOOKING. Michaels will be the first store to offer Provo Craft's Gypsy, a portable design studio that reportedly allows users to create unique scrapbook pages, greeting cards and invitations anywhere without a computer. It can also be used with a Cricut. Michaels began accepting pre-orders on Saturday, and it will debut in stores Oct. 4. Visit www.michaels.com/gypsy.

DEADLINE. August 31 is the deadline to nominate people for the CHA Awards for service to the association (Meritorious Award of Honor), service to the industry (Industry Achievement Award) and service to the world (Special Recognition Award). To nominate someone, visit HERE

YARN. The marketing firm Knitting & Howe is producing a Yarn Crawl Oct. 9-12 in New York City, featuring 13 of NYC's largest yarn retailers. It's a self-guided tour for consumers featuring special demos, exhibits, sales, and promotions. For info visit www.nycyarncrawl.com, call 917-847-7377, or email phyllis@nycyarncrawl.com.

CPSIA. For a free guide to CPSIA, visit www.stericyclecpsi.com/cpsi/guide.

QUOTATION. "I think retailers have let consumers down by taking out classrooms, cutting back on project sheets, doing less inspirational signage, not offering classes or story boards, etc. There are so few craft magazines now, and they are where most beginners get info to learn new crafts and to find inspiration." – Industry Manufacturer, commenting on the success of the CHA consumer show.

TV. The 15th series of Scrapbook Memories, hosted by Julie McGuffee and Beth Madland and produced by KS, Inc. Productions, feeds to PBS stations Sept. 20. Guest artist Julie Fei-Ban Balzer will present special lessons. Sponsors: Elmer's, Sakura of America, Provo, Unibind, Simplicity Creative Group, Doodlebug Design, Kaleidoscope Collections, Spellbinders, JustRite Stampers, Walnut Hollow, Coredinations, Ellison, My Little Shoebox, and Sounds Easy. ... The 29th series of America Sews with Sue Hausmann uplinks Sept. 27. It's produced by KS, Inc. Productions and sponsored by Robison-Anton, Sulky, Rowenta, The Warm Co., Crooked Nickel Quilt Designs, Pellon, Dream World, Havel's, Coats and Clark, and Steady Betty.

TNNA. The room block information for the 2010 summer trade show in Columbus, OH June 12-14 is now listed at www.TNNA.org, as is the registration brochure for the Needlecraft Market Sept. 26-27 in St. Charles, IL. ... TNNA raised $800+ in the fight against breast cancer at the recent Columbus market. Attendees used special pedometers to calculate their "Walk to WIN," total as they walked the show floor and attended classes. In June, TNNA teamed with the Love/Avon Army of Women, a partnership between the Dr. Susan Love Research Foundation and the Avon Foundation. Visit www.armyofwomen.org, www.dslrf.org, and www.avonfoundation.org.

SCAM. "I check my phone bill every month, and this month there was a $30 fee from a third party for web hosting. I called my service provider and disputed it, and called the company to cancel it. This was a true scam. A different company did the same thing on my home line last month. Be sure when you cancel that you ask to hear the tape recorded conversation where you (or an employee) agreed to the service. By law, if they can not produce the tape, you get a full refund. Make sure to tell your service provider too." – Independent Retailer

SIGN OF THE TIMES. "The [job fair] turnout was terrific, there's just a lot of terrific people out here that just need employment," Hobby Lobby Store Manager Sherrie Bice told the Prescott, AZ Daily Courier. Bice gave out 180 job applications for the store.

WEDDINGS. "It's not just people trying to have simple, low-cost weddings," Jo-Ann's Deborah Osbach told the Detroit Free Press. "Both low-end and high-end brides are doing their own. People are doing it to stay on a strict budget or, frequently, just because they want their wedding to have their personal touch."

KIDS. Last Saturday Michaels stores hosted a back-to-school event in which kids personalized a metal tin with paints and stickers to store pencils and school supplies.

INDEPENDENTS. Sierra Pacific Crafts now includes the 20 Catan stores in Ohio. SPC now has 31 corporate members who control 100+ retail stores.

FACTORS. In a letter to customers, CIT Group said it had set aside a third of the $3 billion it raised in recent financing for its factoring unit.

NEW MEDIA. The latest issue of the e-zine, Totally-Creative, is now online. Visit www.totally-creative.com ... Knitting Out Loud released the audio book, The Secret Language of Knitters, narrated by author Mary Beth Temple. It's a humorous dictionary of knitting terms and the 10th audio book released by the company. Visit www.knittingoutloud.com. ... The e-zine Interactive Artist is offering special ad rates. Visit www.interactiveartist.com.   

PEOPLE. President Barack Obama will nominate former Republican Rep. Anne Northup of Kentucky to a seat on the Consumer Product Safety Commission, the Associated Press reported. He is increasing the number of seats on the commission from three to five. Northup was a member of the House from 1997-2006. ... Former Michaels zone vp John Melnick was named Northeast zone vp for Borders. ... Industry veteran Erik Mandelberg is Int. Sales Director for SALEUTIONS USA. His contact info: 516- 697-3014 and emandelberg@saleutions.com.au; the website is www.saleutions.com.au.

CONDOLENCES. CLN learned that Harold Carstens, 84, passed away. Harold was one of the early leaders of the fledgling Hobby Industry Assn., a precursor to the Craft & Hobby Assn. He served as President of the HIA board in 1970-71, and received the HIA's Meritorious Award of Honor. Visit HERE. ... To the family of Tara Materials' co-founder Wally Klarman, who passed away at age 78 last month of Parkinson’s disease. After working many years for art materials companies, he and John Benator founded Tara in 1966. At first the company had four part-time employees and about $75,000 in annual business. Wally built Tara’s first automated coating machine from scratch with his young daughter, Linda, helping to bolt the oven together from the inside. He served on the National Art Materials Trade Assn.'s board of directors and chaired the 1980 convention/trade show In 2004, Wally and John were honored with NAMTA’s Lifetime Achievement Award.

STOCKS. A.C. Moore: $3.25, down $0.36 ... Hancock: $1.06, down $0.04 ... Jo-Ann: $24.19, up $0.89 ... Wal-Mart: $51.79, up $1.91 ... Dow Jones: 9,321.4, up 1.6%. (Note: All changes in price are since 7/31 and are exclusive of dividends.)

To see the latest listings by the only personnel recruitment firm specializing in our industry, click on Jobs in the left-hand column or click HERE.

1. The roundest knight at King Arthur's round table was Sir Cumference. He acquired his size from too much pi.

2. I thought I saw an eye doctor on an Alaskan island, but it was an optical Aleutian.

3. She was only a whiskey maker, but he loved her still.

4. A rubber band pistol was confiscated from algebra class because it was a weapon of math disruption.

5. The butcher backed into the meat grinder and got a little behind in his work.

6. A dog gave birth to puppies near the road and was cited for littering.

7. A grenade thrown into a kitchen in France would result in Linoleum Blownapart.

8. Two silk worms had a race. They ended up in a tie.

9. A hole has been found in the nudist camp wall. The police are looking into it.

10. Atheism is a non-prophet organization.

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