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December 2, , 2009

MICHAELS: SALES, PROFITS UP

Highlights of the earnings report for third quarter ended Oct. 31:

Net income rose to $15 million, compared to a $20 million loss a year ago. For the first nine months of the fiscal year, there is a net income of $21 million versus a $70 million net loss a year ago.

CEO John Menzer cited a strong Halloween season and categories that had been reset – bakeware, bead and jewelry making, and impulse – being top performers.

Net sales for the quarter, up 2.5% to $929 million; same-store sales, up 1.3%, due to a 4.7% increase in transactions, a 3.5% decrease in average ticket, and a positive 0.1% impact from deferred custom framing revenue. Canadian currency translation positively affected same-store sales for the second quarter by approximately 20 basis points.

Gross margin, up 180 basis points to 37.3% ... Selling, general, and administrative expense, up $12 million to $259 million. ... Operating income, up $16 million to $84 million (9.0% of sales) from 7.5% a year ago.

Interest expense, down $15 million, due to a lower average interest rate and lower average debt levels. ... Adjusted EBITDA (cash flow), up 5.4% to $118 million ... Debt levels, down $272 million to $3.911 billion. ... Average inventory per Michaels store, inclusive of distribution centers, down 5.0% to $971,000.

The complete earnings report is available at www.michaels.com. To listen to a recording of the conference call Michael execs held after the report was released, visit the website or call 800-642-1687, PIN #79813922.

JO-ANN: SALES, PROFITS UP

For the third quarter ended Oct. 31, net income was $24.1 million ($0.90/diluted share), versus $10.2 million ($0.40) a year ago, which included $1.3 million after-tax gain ($0.05), related to the purchase of a portion of the company’s senior subordinated notes.

As CLN reported, net sales for the quarter rose 6.0% to $509.1 million and same-store sales rose 4.3%. Large-format store's sales rose 8.7% to $272.0 million and same-store sales increased 2.3%. Small-format store's sales increased 3.0% to $228.5 million and same-store sales rose 6.7%. Sales at Joann.com increased 6.2% to $8.6 million. (To read more of Jo-Ann's sales, see the current issue of CLN at www.clnonline.com.)

Chair/President/CEO Darrell Webb stated, "We achieved strong sales, margin, and earnings improvement in the third quarter, with our financial results exceeding original expectations. Positive customer response to our core sewing and craft merchandise continues to drive sales growth, while our sourcing, inventory management, and expense control initiatives allowed us to achieve gross margin expansion and expense leverage.

"As a result of our solid financial position and the favorable commercial real estate leasing environment," Webb added, "we plan to increase our new store development and remodeling activity next fiscal year."

For the quarter, gross margins increased approximately 200 basis points to 51.0% due to reduced product costs from global sourcing initiatives, lower clearance levels, and reduced freight costs. Selling, general, and administrative expenses increased 1.3% to $202.0 million; as a percentage of net sales it improved approximately 190 basis points to 39.7%. Operating profit for the quarter was $41.5 million, versus $17.3 million a year ago.

The cash balance for the quarter improved by $72.9 million to $97.7 million compared to a year ago. Long-term debt was $47.5 million, down $65.2 million. This $138 million improvement in cash, net of debt, was primarily the result of cash generated from operations and improvements in working capital.

During the quarter the company opened three large-format stores and one small-format store and closed one large-format store and three small-format stores. For fiscal 2010, the company expects to open approximately 20 new stores and close approximately 30 stores. For fiscal 2011, the company expects to open approximately 30 new stores and close approximately 30 stores. The current store count is 228 large-format stores and 531 small-format stores.

The company remodeled 13 stores of which four were transitioned from a small-format to a large-format layout. During the first nine months of the year, the company remodeled 26 stores, of which five were transitioned from a small-format to a large-format layout. The company expects to remodel approximately 30 stores during the year, of which six are expected to transition from a small-format to a large-format layout. For fiscal 2011, the company expects to remodel at least 40 stores during the year.

For the year, the company expects a same-store sales increase of 2.3% - 2.7%; the gross margin rate to improve even more than it has in the first nine months of the year; selling, general, and administrative expenses, as a percentage of net sales, to improve, but less than the it was for the first nine months; and capital expenditures, net of landlord allowances, to be approximately $30 million. As previously announced, the company expects earnings/diluted share to be $1.95 - $2.05 (excluding any gains on debt purchases).

The complete report is available at www.joann.com and a replay of the exec's conference call with analysts is available by calling 800-642-1687, ID #40533836.

HANCOCK: SALES, PROFITS UP

Net sales for the quarter were $72.7 million, up from $70.6 million a year ago, and same-store sales increased 4.0%. Operating income increased $3.6 million as a result of a $4.5 million profit compared to a $0.9 million profit in the previous year’s third quarter.

Net income was $3.0 million ($0.16/share), compared to a net loss of $0.3 million ($0.02) a year ago. EBITDA for the quarter was $6.1 million, an increase of $3.5 million. Inventories have been reduced by $10.0 million compared to the same period last year.

At quarter's end, Hancock had outstanding borrowings under its revolver loan of $25 million and outstanding letters of credit of $6 million.

Year-to-date, net sales were $196.4 million, compared with $198.2 million a year ago, and same-store sales increased 0.9%. Operating income increased by $8 million. Net loss was $0.1 million ($0.01), compared to a net loss of $16.5 million ($0.87). EBITDA was $9.2 million, an increase of $7.8 million over the same period last fiscal year.

President/CEO Jane Aggers said "We are beginning to experience meaningful top line improvement in combination with significant operating cost reductions. Our strong quarter and year-to-date results are a testament to the hard work of all of our associates and management team. We are cautiously optimistic that we can continue to execute our business plan throughout the remainder of the year and into 2010."

Gross margin for the quarter was 46.5%, up 350 basis points, due to a 220-basis-point reduction in merchandise cost, a 50-basis-point reduction in freight costs, and an 80-basis point reduction in sourcing and warehousing. Year-to-date, gross margin improved by 210 basis points to 45.8%.

Selling, general, and administrative expenses for the quarter decreased to $28.2 million (38.8% of sales) from $28.3 million (40.1% of sales) in the prior year. Year-to-date, selling, general, and administrative expenses have been reduced by $4.6 million to $82.3 million (41.9% of sales) from $86.9 million (43.9% of sales). Third quarter reductions were driven by increased labor efficiency, reductions in current quarter ad expenses offset by certain incremental retail operating costs.

During the fiscal year, the company opened 3 stores, closed 1, remodeled 5, and ended the quarter with 265 stores.

Hancock will a conference call tomorrow, Thurs., 10:00 CST. To participate, call 800-599-9816 and give the operator #81066171. A replay will be available: call 888-286-8010 use Pin #80450652. The replay will be available approximately 1:00 p.m. CST on Thurs., and will remain available through Thurs. Dec. 17.

THE UNIVERSAL APPEAL OF SCRAPBOOKING

How universal is it? This Sunday the season finale of the E! Network's Girls Next Door will be about scrapbooking, highlighting the hobby, the supplies, the joys of scrapping with friends, and the pleasure of having and giving the final product. Where is it filmed? The Playboy Manor in California. Turns out Hugh Hefner and his, uh, girlfriends are hardcore scrapbookers. Check your local listings.

Products used in the segment, according to a friend who saw an advance screening, were from K&Co., WeRMemory Keepers, Bazzil, Zig Memory System, Stickles, Adhesive 3L, and Fiskars.

August 29, 2009

JO-ANN'S SECOND QUARTER RESULTS

For the quarter ended Aug. 1, there was a net loss of $3.2 million ($0.13/diluted share), versus a net loss of $11.7 million ($0.47) a year ago. Analysts polled by Thomson Reuters, on average, expected a loss of $0.39/share on revenue of $419.4 million.

As a result, the company increased its previously announced expectations for fiscal 2010 to $1.35-$1.50/diluted share. Analysts were expecting full-year earnings of $1.09/share.

Wall Street liked the results. Following the announcement, the stock gained 3.14% in the after-hours trading at the New York Stock Exchange, and the following day Jo-Ann's stock hit a 52-week high.

Net sales increased 4.1% to $419.4 million and same-store sales increased 1.8%.

Large-format stores' quarterly sales increased 7.7% to $226.1 million and same-store sales increased 0.1%. Small-format stores' sales decreased 0.1% to $185.8 million and same-store sales increased 3.9%. Internet sales through Joann.com increased to $7.5 million from $7.1 million a year ago..

Net sales for the six-month period ended Aug. 1 were $879.4 million versus $849.1 million in the prior year. Same-store sales increased 1.4% for the six-month period compared with a 3.9% increase for the same period last year.

For the first two quarters, large-format store sales increased 6.7% to $470.7 and same-store sales decreased 0.2%. Small-format store net sales decreased 0.3% to $391.7 and same-store sales increased 3.4% versus a 5.2% increase in the prior year.

Chair/President/CEO Darrell Webb said, "Jo-Ann Stores achieved strong financial improvement in the second quarter of fiscal 2010 through continued sales growth, margin expansion, and expense leverage. Our strategy to revitalize the store portfolio, enhance our merchandise offering, and constantly improve store conditions is making a meaningful difference in the shopping experience we provide and is continuing to attract customers."

"We continue to be encouraged by the sales trends in our core sewing and craft categories, which we believe point to sustainable long-term growth for our business," Webb added. "Seasonal products continue to experience sales declines and we have limited visibility into how customers will respond as we move into the second half of the year, when this category becomes a more important component of our business. We continue to plan cautiously for the remainder of fiscal 2010, but our progress in the first half leaves us confident that sales and earnings will exceed our original expectations for the full year."

Gross margins for the quarter increased approximately 170 basis points to 49.3% due to reduced product costs from global sourcing initiatives, reduced freight costs, and lower clearance levels.

Selling, general and administrative expenses increased to $193.3 million from $191.6 million, but as a percentage of sales they improved by approximately 140 basis points to 46.1%.

Operating loss for the second quarter was $3.4 million compared to an operating loss of $16.5 million for the prior year’s second quarter.

The cash balance for the quarter improved by $39 million to $80.2 million. Long-term debt totaled $50.5 million, down $49.5 million from a year ago.

During the second quarter the company opened one large-format store and two small-format stores and closed eight small-format stores. Year-to-date, the company opened 12 large-format and three small-format stores and closed one large-format store and 20 small-format stores. For the entire year, the company expects to open approximately 20 new stores and close approximately 30 stores. Thirteen stores have been remodeled thus far this year, and the company expects to remodel approximately 30 stores during the year.

HANCOCK'S SECOND QUARTER RESULTS

Net sales for the quarter declined from $63.8 million to $59.6 million, and same-store sales decreased 4.2%. However, operating income increased by $1.6 million.

There was a net loss was $2.3 million ($0.12/share) compared to a net loss of $10.9 million ($0.57) a year ago, and EBITDA was $0.9 million, an increase of $1.5 million over the same period last fiscal year.

For the first half of the fiscal year net sales were $123.7 million, down from $127.6 million a year ago. Same-store sales decreased 0.9%. Operating income increased by $4.4 million as a result of the $0.1 million loss in this first half compared to a $4.5 million loss in the previous year’s first half. The net loss was $3.2 million ($0.16) compared to a net loss of $16.2 million ($0.85) a year ago, and EBITDA increased $4.3 million to $3.1 million..

President/CEO Jane Aggers said, "Despite a very challenging retail environment and lower revenue, our year over year results of operations have improved dramatically. This is the result of lowering our SG&A costs and improved management of the balance sheet. Since exiting from bankruptcy on August 1, 2008, we have paid down approximately $27.5 million of debt and pre-petition liabilities. As we further refine our internal planning and operational processes, we are optimistic we can combine our cost reduction initiatives with a meaningful top line improvement."

Gross margin for the quarter improved to 45.8% from 43.4% of the prior year, thanks to reduced merchandise and freight costs. For the first half, the gross margin improved 140 basis points to 45.5%.

Selling, general and administrative expenses for the quarter decreased to $26.9 million (45.2% of sales) from $28.9 million (45.3% of sales) in the prior year. For the first half, SG&A expenses declined by $4.5 million to $54.1 million (43.8% of sales), driven by increased labor efficiency, reduced store operating expenses, and savings of professional fees.

During the first two quarters, the company opened two stores and remodeled four. The current store count is 264.

CHA DEADLINES

Workshop applications for the CHA winter show in Anaheim are due Aug. 28, and applications to conduct a seminar are due Aug. 31. Email Education Manager Amie Kolodziej at akolodziej@craftandhobby.org for info.

CPSC: YARN IS EXEMPT

The Consumer Product Safety Commission has exempted yarn and fabric from the lead testing and certification requirements for children’s products under the Consumer Product Safety Improvement Act. The exemption does not include snaps, buttons, zippers, etc.

The CPSIA says it decided after studying hundreds of test reports and ... "After reviewing and verifying this test data, the staff was able to determine that most textile products are manufactured using processes that do not introduce lead or result in an end product that would exceed the CPSIA’s lead limits," said a statement released by the CPSC.

August 26, 2009

MICHAELS: BACK TO PROFITS

Net income for the quarter ended Aug.1 was $2 million, compared to a $30 million loss for the quarter a year ago. For the first half of fiscal 2009, the net income of $6 million, compared to a $50 million loss last year.

CEO John Menzer said, "A corporate-wide focus on sales and creating a fun customer environment in our stores, coupled with a strong emphasis on expense control, has led to improved sales and operating results for the quarter. The customer continues to be value oriented and selective about what she buys. She has responded favorably to newness and events introduced this year including, our Impulse, Bakeware, and Beads & Jewelry Making categories."

Sales for the quarter rose 1.4% to $807 million, but same-store sales declined 0.8% due to a 7.0% decrease in average ticket and a 6.2% increase in transactions. Canadian currency translation adversely affected same-store sales for the second quarter by approximately 100 basis points.

Sales for the first two quarters rose 1.0% to $1.659 billion, but same-store sales declined 1.4%, due to 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 second quarter gross margin increased 50 basis points to 35.4%, driven by a merchandise margin improvement of 20 basis points related to the company's "profit optimization efforts" and a 30-basis-point reduction in occupancy costs due to lower utilities and amortization expense. Year-to-date gross margin decreased 60 basis points to 36.2%, driven by a decrease of 50 basis points in merchandise margin and a decreased leverage of 10 basis points in occupancy costs. The decrease in merchandise margin was principally due to clearance and promotional programs associated with the introduction of new product for merchandise reset activities.

Selling, general and administrative (SG&A) expense in the second quarter decreased $14 million to $232 million, or as a percent of sales, from 30.9% to 28.7%, primarily due to reductions in payroll, severance, and depreciation expense, and the prior year included non-recurring consulting expenses for studies related to consumer insights and other strategic initiatives. Year-to-date, SG&A expense decreased $40 million to $478 million, or as a percent of sales to 28.8% of sales from 31.5%.

Operating income for the quarter increased $23 million to $50 million, or 6.2% of sales, compared to 3.4% a year ago. Year-to-date operating income was $114 million, or 6.9% of sales, versus $75 million, or 4.6% of sales, for the first half of fiscal 2008.

Interest expense was lower by $14 million and $29 million for the quarter and first half, respectively, due to a lower average interest rate on our floating rate debt and lower average debt levels.

Adjusted EBITDA for the second quarter of fiscal 2009 increased 16.4% or approximately $12 million to $85 million, from $73 million for the same period last year. Year-to-date Adjusted EBITDA was $192 million, or 11.6% of sales, versus $170 million, or 10.3% of sales, in the first half of fiscal 2008.

As of Aug. 1, the company's cash balance was $36 million. Second quarter debt levels declined $70 million to $3.964 billion compared to$4.034 billion as of the end of second quarter of fiscal 2008. Availability under the revolving credit facility was $526 million. During the quarter, the company also made a $5.9 million amortization payment on its Senior Secured Term Loan.

Average inventory per Michaels store at the end of the quarter, inclusive of distribution centers, was down 1.1% to $889,000, due primarily to lower freight costs.

Year to date, capital spending totaled $17 million, with $12 million attributable to real estate activities, such as new, relocated, existing, and remodeled stores, and $5 million for strategic initiatives and maintenance activities. During the first half of fiscal 2009, the company opened 14 new stores and relocated four Michaels stores and closed six Aaron Brothers stores. The current store count is 1,023 Michaels stores and 155 Aaron Brothers stores.

MICHAELS NAMES VENDORS, CARRIERS OF THE YEAR

At Michaels' 12th Annual CEO Summit in Dallas, the company announced its Vendor and Carrier Partnership of the Year Awards. Winners of the vendor awards were American Oak Preserving, ColArt Americas, Gartner Studios, Halcraft, Horizon Group, and iLOVEtoCREATE (Duncan Ent.). The Carrier awards went to China Shipping Container Lines and Interstate Distributor Co.

JULY 20, 2009

WILTON PRESSURED BY CREDITORS

This morning Reuters reported that creditors of Wilton Holdings asked a court to place the company in Chapter 11 involuntary bankruptcy due to $208 million in debts.

Founded in 1929, Wilton has been the dominant cake-decorating company for decades. It and Dimensions, a major needlework company, were sold to GTCR Golder Rauner, a private equity firm, on Aug. 1, 2007. GTCR had previously acquired EK Success in Feb., 2006. Wilton became Wilton Holdings, an umbrella firm under which were GTCR's other industry-related acquisitions, including EK Success and Dimensions.

JGF Credit LLC, an affiliate of yet another private equity firm, TowerBrook Capital Partners, had acquired $104.3 million of unsecured claims against Wilton. Deutsche Bank Trust Co Americas of New York also joined the petition. Deutsche is acting as an administrative agent for an additional $104.3 million claim.

Wilton is not just cake decorating. Other divisions include The Weston Gallery, a picture frame company, and Copco, a producer of tea kettles and kitchenware. Today's issue of CLN includes a report that Wilton had to recall about 142,000 tea kettles because of a burn hazard.

Dimensions is not just needlework. The company's other divisions include K&Co., a scrapbook supplier; Paintworks, a paint-by-number producer; Perler Beads, a supplier of beading activities for kids; and Inkadinkado, a supplier of rubber stamp products.

Late last year Standard & Poor's warned that Wilton was highly leveraged, vulnerable to fads and a slowing economy, and was behind on a plan to cut costs, Reuters reported. In March Wilton was included in Moody’s list of 283 "Troubled Companies" which Moody’s believed were most likely to default on their debt.

Also in March, Wilton announced that it would close the Dimensions' facility in Reading, PA, which employed 118, and would outsource production by year's end. At the time Wilton CEO Richard Conti said, "The current economic environment and competitive forces require us to increase efficiency and effectiveness in order to maintain the health of the overall company."

WILTON RESPONDS

This afternoon Wilton issued the following statement:

Woodridge, Ill., - (July 20, 2009) - We are aware of recent reports that Wilton is going into chapter 11 restructuring. Here are the facts.

First, and most importantly, Wilton Brands Inc. is not in chapter 11. Further, it has not been petitioned into chapter 11 nor have any of the other operating companies that market and sell our products.

As a result of certain breaches of our loan covenants that have been previously disclosed, creditors of the parent company of Wilton Brands Inc. filed an involuntary petition against that holding company (Wilton Holdings, Inc.). While that company bears the Wilton name, the petition was not filed against any of the operating companies and does not affect their day-to-day operations.

The company's owners and lenders are working diligently to resolve this matter. Management is monitoring these discussions and our primary focus remains on running our business as usual.

The company’s operating results are solid in spite of the challenging economic environment. Operating income is ahead of last year's strong results, partially due to the achievement of our cost savings initiatives. Wilton Brands Inc. will continue to conduct its business in the ordinary course and will continue to honor its obligations. We value our relationships with all of our customers and suppliers and look forward to continued growth together.

CIT UPDATE

Today's issue of CLN includes an article about the financial woes of CIT, a major lender to thousands of small and medium-size vendors and retailers. When the issue went online, it looked like CIT was on the verge of bankruptcy because of its inability to pay $1 billion to bondholders in August.

Since then, however, CIT's board has reportedly approved a deal for a $3 billion short-term bridge loan and should avoid bankruptcy, for now.

BECKY JONES RESIGNS

Becky Jones, VP/General Merchandise Manager - Crafts, for Jo-Ann, is leaving the end of the month for a position at Hibbett's, a sporting goods chain. She has also resigned from the Craft & Hobby Association's Board of Directors.

June 4, 2009

MICHAELS FIRST-QUARTER RESULTS

Net income for the first quarter ended May 2 was $4 million, up $24 million from a net loss of $20 million in the first quarter a year ago. Total sales were up 0.6% to $852 million, but same-store sales declined 2.0% of which 1.7% was related to the negative impact of foreign exchange rates.

John Menzer in his first quarterly report as CEO, said, "Our operating units performed relatively well, which were offset by the continued negative impact of a weakened Canadian dollar. We were very encouraged with the sales in a number of key categories, including Beads and Jewelry Making, Impulse items, and Wall Frames. Our new marketing and merchandising programs are connecting with the Michaels customers and have helped drive an increase in customer transactions, even in today's difficult retail environment.

"I have challenged the Michaels team to renew their commitment to be the destination of choice for 'Where Creativity Happens,'" Menzer added, "and continue to provide strong customer service in our stores. This is the clearest path to increase sales, and where our energy and efforts must remain focused.,"

The 2.0% decline in same-store sales was the result of a 5.2% decrease in average ticket, a 3.6% increase in transactions, and a negative 0.4% impact from deferred custom framing revenue.

The gross margin rate, inclusive of occupancy costs, was 37%, down 150 basis points from a year ago. It was caused by a 100 basis point decline in merchandise margin primarily because of a greater sales mix of promotional and clearance items, and a de-leveraging in occupancy costs against declining same-store sales and average store sales volume.

Selling, general and administrative expense decreased $26 million to $246 million; as a percent of sales, it decreased 320 basis points to 28.9%, due primarily to lower store and corporate salaries and benefits, bonus, and severance expense.

Operating income rose $16 million to $64 million, or 7.5% of sales, compared to $48 million, or 5.7% of sales, a year ago. Interest expense down $15 million to $63 million, due to a lower average interest rate on variable-rate debt and lower average debt levels.

Adjusted EBITDA for the quarter was $107 million, or 12.6% of sales, compared to $97 million, or 11.5% of sales, for the same period last year.

The company's debt at the end of the quarter was $3.957 billion, down approximately $22 million from the prior year. By quarter's end, Michaels had $32 million in cash and approximately $539 million of availability under its revolving credit facility. As of June 2, it's approximately $530 million.

Average Michaels store inventory, inclusive of distribution centers, was up 3.1% to $833,000, in part due to timing of inventory plan-o-gram resets scheduled for the first half fiscal 2009.

Capital spending for the quarter totaled $11 million, including $8 million for real estate activities, such as new, relocated, existing, and remodeled stores, and $3 million for merchandise and supply chain systems enhancements.

During the quarter, the company opened 11 Michaels stores and relocated 4; it also closed 5 Aaron Bros. stores. The current count: 1,022 Michaels stores and 156 Aaron Brothers stores.

To read the complete report, visit www.michaels.com, scroll down and click on Corporate Information.

HANCOCK FABRICS' FIRST-QUARTER REPORT

Net sales for the quarter were $64.1 million compared with $63.8 million in the first quarter last year; same-store sales increased 2.3%. Operating income was $0.6 million, up $2.8 million from a year ago.

There was a net loss $0.9 million ($0.05/share), compared to a net loss of $5.3 million ($0.28) a year ago. EBITDA was $2.2 million, an increase of $2.8 million over the same period last year.

Inventories have been reduced by $3.6 million since fiscal year end and $17.7 million compared to the same period last year.

At quarter end, the Company had outstanding borrowings under its Revolver of $31.8 million and outstanding letters of credit of $7.1 million. Additional amounts available to borrow at that time were $34.9 million.

President/CEO Jane Aggers said "Although the retail environment is still challenging, we continue to make progress on our key operating initiatives: improving operations and reducing debt. Our efforts have resulted in the significant increase in EBITDA and the narrowing of our loss. We will continue to focus on these initiatives, while providing our customers with the products, services, and value they desire as we strive to return to profitability."

Gross margin improved to 45.1% from 44.8% a year ago, thanks to a 40 basis-point reduction in merchandise cost and a 40 basis-point reduction in freight costs offset by reduced supply chain leverage as store count and inventory levels have diminished from prior periods.

Selling, general and administrative expenses decreased to $27.2 million (42.4% of sales) from $29.8 million (46.6% of sales) in the prior year, thanks to increased labor efficiency, reduced store operating expenses, and savings of professional fees.

During the quarter Hancock opened 1 store and remodeled 2 l. The store count is 264 stores.

To read the complete report, visit www.hancockfabrics.com, scroll down the page, and click on Investors.

February 10, 2009

UPDATE: CPSIA

You may be able to breathe a temporary sigh of relief regarding the Consumer Product Safety Improvement Act – I THINK. Yesterday the Consumer Product Safety Commission issued a one-year stay of enforcement on certain requirements in the CPSIA legislation. Some of the CPSIA requirements were to go into effect today.

But don't take my word for it: read the statement in the Federal Register:

http://www.cpsc.gov/businfo/frnotices/fr09/stayenforce.pdf. It's written in lawyer-speak, of course. It might be best if you had a lawyer and a chemist read it, too.

Yesterday the CPSC also issued "Standard Operating Procedure for Determination of Phthalates." (You will need a chemist for this one.) Visit http://www.cpsc.gov/about/cpsia/phthalatesop.pdf.

The statements came the same day USA Today published a cover story, "Changing safety rules perplex and polarize." The article reported that four members of Congress, Sen. Jay Rockefeller (D, WV), Sen. Mark Pryor (D, AR), Rep. Henry Waxman (D, CA), and Rep. Bobby Rush (D, IL), sent a letter to President Obama imploring him to ask for the resignation of CPSC acting Chair Nancy Nord.

Late Friday the CPSC adopted an enforcement policy regarding lead limits that reportedly expanded exclusions and placed greater reliance on manufacturer good faith. In a legislative update the Toy Industry Association said, "The action appears to provide some of the relief that has been requested by the makers of toys and other children’s products, at least insofar as lead enforcement is concerned."

To read the update, visit http://tia.informz.net/tia/archives/archive_235330.html.

February 6, 2009

UPDATE: THE CONSUMER PRODUCT SAFETY IMPROVEMENT ACT (CPSIA)

As reported in the current issue of CLN (www.clnonline.com), the U.S. Consumer Product Safety Commission issued a one-year stay of enforcement of the new standards included in the CPSIA. However, the stay apparently did not effect the provision that products produced before the law and its testing requirements now have to be off the shelf by Tuesday, February 10.

In a Jan. 31 message to members and industry contacts, Toy Industry Assn. President Carter Keithley said "The testing and certification requirements are deferred for one year, but compliance with the new CPSIA standards begins in just over a week . . . and the only way to demonstrate this compliance is through testing."

Senator Jim DeMint (R, SC) has offered an amendment to the American Recovery & Reinvestment Act of 2009 that would postpone for six months the implementation requirements of the CPSIA. That bill (the economic stimulus bill) has been passed by the House of Representatives and is currently being debated in the Senate.

Efforts by various groups are being made to bombard Congress with letters, faxes, and phone calls urging Congress to include Sen. DeMint's amendment in the bill. The bill is expected to eventually pass, but the amendment is in question. For more, visit http://tia.informz.net/tia/archives/archive_232715.html. To contact Congress, visit http://capwiz.com/toyassociation/issues/alert/?alertid=12548611.

Furthermore, the CPSC's General Counsel had issued an opinion regarding the non-retroactive application of the phthalate ban, saying it would not apply to products manufactured prior to February 10, but two consumer advocacy groups, the National Resources Defense Council and Public Citizen, filed a lawsuit in the District Court for Southern District of New York against the interpretation, and the court ruled against the Counsel's opinion. The Court said the phthalate restrictions in the law would, in fact, apply to all products offered for sale and distribution after February 10 – including existing inventory.

Meanwhile, Representative Pete Hoekstra and Representative Henry Waxman, Chair of the

House Committee on Energy and Commerce, have written letters to the CPSC. Hoekstra's letter requested "that it provide my office with clearly stated rules and standard procedures concerning CPSIA. I have also requested that it consider exemptions where reasonably appropriate for component part testing, as well as the testing and certification requirements for small manufacturers and businesses, resellers, and consignment stores."

One vendor told CLN this afternoon, "We are taking a product off shelves as we speak."

December 3, 2008

JO-ANN'S PROFITS RISE

Net income for the third quarter ended Nov. 1 was $10.2 million ($0.40/diluted share), up 27.5% versus a year ago. The current quarter net income includes a $1.3 million after-tax gain ($0.05) related to the repurchase of a portion of the company’s senior subordinated notes. Excluding this gain, net income was $8.9 million ($0.35).

The company has lowered its full-year guidance from $0.95-$1.05/share to $0.75-$0.85 due to flat same-store sales compared to the previously announced gain of 2.0%-3.5%. However, the gross margin rate and selling, general, and administrative expense as a percentage of net sales are expected to improve.

Net sales for the quarter were $480.1 million, essentially equal to the $480.2 million sales a year ago. Same-store sales decreased 1.5%. Large-format store net sales decreased 2.1% to $247.2 million, and same-store sales decreased 3.8%. Small-format store net sales decreased 1.2% to $224.8 million and same-store sales rose 1.2%.

Net sales for the first three quarters were $1.33 billion versus $1.29 billion a year ago, and same-store sales increased 1.9%. Large-format store sales increased 1.7% to $687.5 million, and same-store sales increased 0.3%. Small-format store net sales rose slightly to $618.3 million, and same-store sales increased 3.7%.

Chair/President/CEO Darrell Webb said, "Strong execution in the areas of our business that we can control enabled Jo-Ann Stores to deliver earnings growth in the third quarter despite the challenging economic environment. Our balance sheet continued to strengthen as we generated improvements in both debt and inventory positions. Prudent inventory management also helped us achieve gross margin expansion in the quarter. Our core sewing and craft businesses remained stable, as our sales decline was primarily due to weakness in seasonal merchandise and higher ticket categories." Mr. Webb concluded, "We remain committed to our long-term strategic plan and will continue to proactively manage our business to optimize results through the current economic conditions."

Gross margins for the quarter increased approximately 1 percentage point to 49.0%, due to reduced sales of clearance merchandise and lower costs from global sourcing initiatives, particularly on fabrics.

Selling, general and administrative expenses for the quarter increased to $199.5 million from $199.1 million – up slightly at 41.6% of net sales compared with 41.5% due to de-leveraging of net sales and training costs related to the new point-of-sale system, offset to a large extent by initiatives to manage operating costs.

Operating profit for the quarter was $17.3 million, up from $16.7 million a year ago. During the third quarter the company repurchased $20.4 million of its senior subordinated notes at a discount of approximately 12% to par value, and recorded a $2.1 million pre-tax gain including the write-off of deferred finance charges.

During the third quarter of fiscal 2009, the company opened six new large-format stores and six small-format stores and closed 12 small-format stores. Year-to-date, the company has opened nine large-format stores and six small-format stores and closed two large-format stores and 19 small-format stores. For the entire fiscal year the company expects to open 21 new stores, close approximately 30 stores, and remodel 129 stores. (28 have already been remodeled.) The current store count is 208 large-format stores and 560 small-format stores.

The official press release will be available at www.joann.com and a replay of today's conference call will be available at www.joann.com and at http://www.streetevents.com or by phone at 800-642-1687, conference ID # 69142549.

December 2, 2008

MICHAELS: SALES, EARNINGS, EBITDA DOWN

Michaels reported a net loss for the third quarter ended Nov. 1 of $20 million, compared to an $18 million loss a year ago. However, the net loss for the first three quarters is $70 million, compared to $85 million a year ago.

Net sales declined 3.0% to $906 million, and same-store sales fell 6.5%, due to a 2.8% decrease in average ticket, a 3.9% decline in transactions, and a 0.2% increase in custom frame deliveries.

Fiscal year to date, sales are down 0.5% to $2.549 billion, and same-store sales are down 4.1%, due to a 1.2% drop in average ticket and a 2.9% drop in transactions.

CEO Brian Cornell said, "We continue to face difficult economic conditions, and the results for the quarter reflect the softness in spending on higher ticket items, particularly within the seasonal and home decor categories. However, we were encouraged by the relative strength of our core arts and crafts business which declined only slightly for the quarter While our long-term strategic initiatives remain a priority, in order to manage through near-term challenges, our immediate focus is on delivering a value message through our merchandising and marketing efforts, controlling expenses, and preserving liquidity."

(Note: The softness in seasonal and home dec sales is similar to what Bob Ferguson reported in his article, "Why Industry Sales Are Down" in the current issue of Business-Wise. Visit www.clnonline.com and click on Business-Wise in the left-hand column.)

The gross margin rate for the quarter declined to 35.5% from 36.7% primarily due to "a deleveraging in occupancy costs partly offset by a 10 basis point increase in merchandise margin. Year to date, the decline was driven by "a deleveraging in occupancy costs and a 40basis point reduction in merchandise margin."

Other highlights of the quarter: Selling, general, and administrative expense fell 5.4%, or $14 million, due to a reversal of year-to-date bonus accruals. ... Operating income increased approximately $1 million to $68 million (7.5% of sales) from $67 million (7.2% of sales). The increase was due primarily to lower selling, general and administrative expense and transaction expenses, partly offset by the reduction in gross profit. ... Interest expense was lower by $18 million ($54 million less for the first nine months) due to a lower average interest rate on the company's floating rate debt and lower average debt levels.

Adjusted EBITDA for the third quarter was down to $112 million (12.4% of sales), versus $118 million (12.6% of sales) a year ago. Year-to-date, it's down to $282 million (11.1% of sales) from $321 million (12.5% of sales).

(Note: For more on EBITDA, return to www.clnonline.com and click on Kate's Collage in the left-hand column to read "So, What IS EBITDA?")

Third quarter debt levels totaled $4.183 billion, largely flat compared to last year's $4.181 billion. During the quarter, the company made a $5.9 million amortization payment on its Senior Secured Term Loan. At the end of the third quarter, Michaels had $92 million in cash and $510+ million of availability under its revolving credit facility, compared to $57 million in cash and $509 million of availability a year ago. As of Dec. 1, availability under the credit facility increased to approximately $630 million.

Year to date, capital spending is down to $66 million versus $86 million a year ago. "In light of the current economic environment, the Company will be evaluating its capital expenditure plan for 2009 and currently expects its real estate activity to be significantly reduced by scaling back the new store opening program and focusing on the best opportunities available in the marketplace."

Year to date, the company opened 50 new Michaels stores, relocated nine stores, and remodeled 11 stores. It also relocated one and closed three Aaron Brothers stores.

The complete earnings release is available on the Michael's website, www.michaels.com

November 20, 2008

MICHAELS SALES DROP

Michaels reported total sales for the third quarter were $906 million, down 3.0%, and same-store sales declined 6.5%. Same-store sales were lower because of a 2.8% decrease in average ticket, a 3.9% decrease in transactions, and a 0.2% increase in custom frame deliveries.

For the first three quarters, sales have decreased 0.5% to $2.549 billion, and same-store sales are down 4.1%. – thanks to a 1.2% decrease in average ticket and a 2.9% decrease in transactions. Canadian currency translation reduced the average ticket for the third quarter by approximately 0.7% and added approximately 0.3% for the first nine months of fiscal 2008.

The company also announced that its cash position at the end of the third quarter was approximately $92 million. In addition to its cash balance, the company has an asset-based revolving credit facility, which provides senior secured liquidity of up to $1.0 billion subject to a borrowing base as described in the company's annual 10K report. As of the end of the third quarter, the company had borrowings outstanding under this credit facility of $407 million and had additional $510 million of availability.

In the current issue, CLN reported A.C. Moore's third quarter sales declined 4.9% to $116.7 million, and same-store sales decreased 9.4%. Jo-Ann reported third quarter sales were flat at $480.1 million, and same-store sales decreased 1.5%;

Michaels will release its third quarter results on Tues., Dec. 2.

July 21, 2008

THE CHA SUMMER SHOW

The show was smaller in terms of exhibitors, booths, and buyers, but larger than CLN expected, given the state of the economy and reports of substantial declines at the Atlanta and Dallas gift shows. This morning there was a report that even convention attendance in Las Vegas is down 10%. CLN should have specific show numbers in the next issue.

Despite the smaller size, a member of Sierra Pacific Crafts, the industry's most successful group of independent retailers, told CLN that SPC members who attended all reported finding exciting new products for their stores. Buyers were was cautious, but definitely placed orders.

Scrapbooking is down, but leveling. One key scrapbook vendor told CLN, "Attendance was down, but the market is where it should be. We no longer have retailers rushing in, placing a big order, then going out of business in six months."

There were three major topics of conversation.

1. Inflation. Some vendors seemed almost in a state of shock as they told CLN how the cost of their raw materials has skyrocketed. Double-digit increases two and three times this year were not uncommon– and warnings that more increases were on the way.

"If there is any good news in all this," a major vendor told CLN, "it's that the retailers finally realize we have to pass along some of these increases. For a long time they wouldn't accept any increase; now they finally are beginning to understand."

Part of the chains' more-understanding attitude is that they are feeling it first hand. As they attempt more direct importing, they are seeing price increases as inflation increases in China. The products cost more, as does the shipping.

2. Recession. Every retailer CLN talked to said sales were down. In some cases traffic was up, but the average sale was lower. One craft retailer told CLN, "I sell Yankee candles. One of the more expensive candles is a half-tank of gas. Customers are thinking like that these days."

3. Orlando. The '09 Summer Show is moving to Orlando, on a Tues., Wed., Thursday in late July, followed by a two-day consumer show. (As CLN understands it, trade exhibitors will not be required to exhibit at the consumer show.) The majority of attendees CLN talked to opposed the move, but that might be because they could drive to Chicago. The next issue of CLN will include an opportunity for you to vote on the move.

Many of the specific issues of the consumer show – who can exhibit, who can sell, how will the show be promoted, etc., have not been completed, but that didn't stop the rumors from spreading like wildfire. (Advice: Withhold judgment about the consumer show until all of the details have been determined.)

May 28, 2008

CRUNCH TIME FOR THE ORPHAN WORKS BILLS

Next week (June 4-5) a group of concerned citizens opposed to the Orphan Works bills in Congress will lobby members of the Senate and House of Representatives. The organizations officially opposed to the legislation are the Craft & Hobby Assn., The National NeedleArts Assn., the Society of Decorative Painters, and a wide range of groups representing artists, designers, photographers, illustrators, and cartoonists.

CLN has learned from David Brog, former Chief of Staff for Senator Arlen Specter (R, PA), that to get the attention of a member of Congress, the magic number of communications (phone calls, letters, emails, postcards, etc.) is 1,000.

It would be particularly helpful if there were 1,000 or more communications received by the time the lobbying group meets with Senators.

All of the members of the House and Senate have an easy, quick way to email them through their websites. Fax and phone numbers will be on the site, too. (If you call, make sure the staffer writes down your name/address.)

To send a postcard to your Senator, all you need write is "Please vote NO on S-2913," and your name and address. However, do NOT send it to his/her office in Washington, DC, where it takes as long as two weeks (because of scanning and screening) before it's delivered to the Senator's office. Instead, go to www.senate.gov and click on "Find Your Senator" in the upper right-hand corner. That will lead you to your Senators' websites. There look for the address of a district office (one in your home state) and mail the postcard there.

The procedure is similar for contacting members of the House. Go to www.house.gov to be directed to your House member's website. The House version of the bill is H.R. 5889. Again, send it to a local office, not Washington, DC.

The two Senators who introduced the Senate version are Orrin Hatch (R, UT, http://hatch.senate.gov/public) and Patrick Leahy (D, VT, http://leahy.senate.gov).

Want to join the lobbying effort in Washington in person? (Appointments have been made with various Senators.) For info about the trip and how you can participate, call Joanne Fink or Marisa Shapiro at 407-330-4465 or email graphics@lakeside-design.com.

To learn more about the harm the Orphan Works bills would cause: 1. Go to CLN's site, www.clnonline.com, and read "More on the Orphan Works Bills" in the current issue. 2. Click on Designing Perspectives in the left-hand column. 3. Click on Newsbriefs, also in the left-hand column, and read the May 8 issue.

May 8, 2008

ORPHAN WORKS BILLS TO PASS?

The Orphan Works bills are moving through Congress. These bills (H.R. 5889 in the House of Representative and S. 2913 in the Senate) could do serious harm to the industry, making it impossible for designers and manufacturers to protect their designs. The House version passed unanimously in a subcommittee and the Senate version is being considered now by a subcommittee.

To read an explanation of the harm these bills could do to the industry, visit www.clnonline.com and click on Designing Perspectives in the left-hand column.

To read the current status of the bills, visit http://capwiz.com/illustratorspartnership/home. The site also makes it remarkably easy (less than five minutes) to email your House and Senate representatives.

Brenda Pinnick of Brenda Pinnick Designs and a member of the CHA Designer Council and on the Professional Advisory Committee for the Art Institute of Atlanta, summed up the problem:

"In my wildest imagination, I cannot imagine how a designer/artist will be able to continue offering art and design for this industry. People who have spent all their lives and devoted their professional expertise to this industry will be left without protection and a livelihood. EVERYTHING will become "clip art" and it will put the art into the hands of people who can and will, claim it as their own."

JO-ANN: STRONG FIRST-QUARTER SALES

Jo-Ann reported net sales for the first quarter ended May 3, increased 5.2% to $446.1 million from $424.2 million in the prior year. Same-store sales increased 4.5%. The company will report earnings for its first quarter on May 28.

APRIL SALES: BETTER THAN EXPECTED, SORT OF

According to Thomson Financial, 19 retailers beat same-store sales estimates, while nine missed.

Thomson Reuters said more than two-third of the 33 reporting retailers exceeded estimates, while one-third missed, MarketWatch reported. However, "More retailers discount more heavily than in the past," warned Sherif Mityas, a partner at consultant A.T. Kearney. "What they are picking up in sales they are giving back in margins. This is not a fundamental shift that we've hit bottom and now all is rosy."

The annual problem with evaluating March and April same-store sales is the ever-shifting date of Easter. Plus, because of a quirk in the calendar, this April had one extra shopping day compared to a year ago. Combining March/April sales and comparing them with 2007 figures, the overall growth was only 1.5% percent, in line with the average sales growth since the beginning of the industry's fiscal year, the Associated Press reported.

According to PR Newswire, Jo-Ann's same store sales rose 4.5%.

April same-store sales figures from a sampling of retailers: Sam's Club, +6.6% ...Costco, +5% ... Family Dollar, +4.3% ... Kohl's, +3.5% ... Wal-Mart, +3.2% ... Target, +3.1% ... J.C. Penney, -1.7% ... Nieman Marcus, -1.9% ... Nordstrom, -3.8% (Reminder: Michaels, Hobby Lobby, and A.C. Moore do not report monthly sales figures.)

A number of retailers reported disappointing sales of jewelry. (Perhaps this could be a prime time for consumers to save money by making their own?)

March 19, 2008

MICHAELS' FOURTH QUARTER EARNINGS

Total sales for the quarter declined 4.4% to $1.301 billion from the fiscal 2006 fourth quarter, which was a 14-week quarter. The extra week a year ago accounted for $59 million. Same-store sales decreased 3.4%.

The gross margin rate is down to 40.0% versus 41.8% a year ago, due primarily to "lower sell-through of seasonal products and a de-leveraging of occupancy costs due to negative comparable-store sales performance," the company said. Selling, general, and administrative expenses (SG&A) as a percentage of sales were flat. Operating income increased to 15.4% of sales from 3.1% a year ago, primarily due to the absence of $218 million in merger-related, transaction, and related party expenses in the prior year, partly offset by a $22 million goodwill impairment charge related to the company's Aaron Brothers division.

Net income increased $120 million, from a net loss of $67 million to a net income of $53 million, primarily due to the absence of merger-related expenses. Adjusted EBITDA for the quarter was $266 million or 20.4% of sales.

CEO Brian Cornell said, "Sales performance in the fourth quarter was below the company's expectations as customer traffic was softer than planned and Christmas and holiday categories underperformed. While discretionary spending was down significantly on higher ticket, seasonal items, we experienced solid performance in many of our core business lines."

"In the face of a challenging fourth quarter sales environment," Cornell added, "we continued to operate prudently. Through aggressive efforts across the company, we were able to control costs, reduce our average store inventory levels, and strengthen our financial position, with a reduction in our debt level of approximately $100 million since last year and nearly $400 million since our peak post-closing level.

"Most importantly," Cornell concluded, "we continued to make significant progress on our key strategic initiatives, particularly the global sourcing and consumer insights programs. As a result, we are confident in our approach to drive long-term profitable growth as we capitalize on significant margin enhancement opportunities and begin to transition into a more consumer focused organization."

MICHAELS' FISCAL YEAR EARNINGS

Sales for the year rose 0.5% to $3.862 billion, but same-store sales decreased 0.7%. The gross margin rate decreased from 38.5% in fiscal 2006 to 38.3% in fiscal 2007, primarily due to the "de-leveraging of occupancy expense, which increased by 50 basis points as a percentage of sales," the company reported..

SG&A expenses as a percent of sales increased 50 basis points to 27.1%, primarily due to consulting fees and higher advertising expense. Operating income as a percent of sales increased from 5.4% to 9.2%, due to the absence of significant merger-related expenses.

Net income decreased $73 million from $41 million to a net loss of $32 million. Adjusted EBITDA was $587 million or 15.2% of sales, compared to $620 million or 16.1% a year ago.

The cash balance at the end of the year was $29 million, down $1 million from the previous year. Average inventory/Michaels store at the end of the fourth quarter, inclusive of distribution centers, was down 4.5% to $830,000, primarily due "to appropriate management of inventory in light of the challenging sales environment," the company said..

For the year, net cash provided by operating activities was up $111 million to $268 million. Capital spending was down $43 million to $100 million.

The debt level at year's end is down $96 million to $3.863 billion, and $392 million lower than the peak post-closing borrowing level of $4.255 billion on Nov. 9, 2006.

During the year the company opened 45 new Michaels stores, relocated 11, and closed three; it opened two and closed two Aaron Brothers stores; and closed its 11 Recollections and three Star Decorators' Wholesale stores. The current store count is 972 Michaels stores and 164 Aaron Brothers stores.

For this year same-store sales are expected to be flat and net cash from operations and Adjusted EBITDA are expected to be consistent with fiscal 2007 levels.

MICHAELS' CFO RESIGNS

Michaels also reported President/CFO Jeffrey Boyer will resign effective April 4. The company will conduct an internal and external search for a CFO; in the interim, Michaels named Sr. VP-Finance and Treasurer Lisa Klinger to be Acting CFO and VP Finance and Corporate Controller Richard Jablonski to be principle accounting officer.

February 17, 2008

CHA WINTER SHOW REPORT

If a trade show is produced and marketed effectively, then the show becomes an accurate reflection of the state of the industry. The Anaheim extravaganza was just such an event.

The show was smaller than last year. Some returning exhibitors took fewer booths and scrapbooking is not generating as many new vendors as it did a few years ago. Attendance was down, too. While final figures are not yet available, the number of buyers was down about 15%, due to the economy and a smaller number of scrapbook retailers. There was a large group of international buyers – not surprising given the weak U.S. dollar.

Mood. Better than expected: a) The national recession that's apparently looming on the horizon does not frighten our industry's independents; b) Many independents seemed to have a better holiday season than national chains such as Wal-Mart, Macy's, etc.; c) They were relatively pleased with January sales, too.

Scrapbooking. The aisles weren't as crowded, but a number of exhibitors said attendees placed larger orders than usual. ... At a CHA task force luncheon for scrapbook retailers, the consensus was that the category's top, crucial priority must be attracting new scrappers. ... Most attendees agreed scrapbooking seemed to be slipping. ... The Two Peas message boards are filled with positive, enthusiastic reports and photos from the show, while the Scrapsmack blog is filled with its typical negative, snide comments about the people and the products.

Crafts. Very little order writing, as usual. Many vendors to the chains are worried by the chains' increasing attempts to go direct to the Orient, particularly Michaels and A.C. Moore. To maintain relationships with the chains, U.S. vendors and importers will have to add value to their product lines. ... The extensive Crafty Chica line from Duncan was the most unique new line CLN saw at the show – the first attempt by a large vendor to address the growing Hispanic population. ... There seemed to be an increase in beads, wearable art, and basic products.

Miscellaneous. The industry is going green. There were enough new eco-friendly products to provide a year's worth of material for Creative Home Arts magazine's new column, "Make It Green." ... Those looking for "the next big thing" didn't find it. ... There was lots of talk about the Summer Show.

Summary. As is true at every show, most vendors who introduced appealing new products had a good show; those who didn't, didn't.

February 7, 2008

JANUARY RETAIL SALES: UH OH

National retailers generally reported disappointing sales last month, perhaps symbolized by Wal-Mart, which reported a 0.5% gain in same-store sales. Analysts surveyed by Thomson Financial had expected a 2.0% increase, the Associated Press reported. Same-store sales in U.S. Wal-Marts rose only 0.2% and the company predicted same-store sales in February would be flat to +2.%. Target's same-store sales declined 1.1%.

Industry retailers such as Michaels, Jo-Ann, and A.C. Moore do not report monthly sales figures.

Retailers blamed the economy, citing cases of consumers using gift cards to purchase necessities, the AP concluded. Wal-Mart said staples such as groceries remained strong, but home furnishing sales were weak. One of the few retailers to exceed analysts' expectations was Costco, which reported a 7.0% gain in same-store sales.

"Clearly, this is a reflection of a very difficult environment for the consumer," Ken Perkins, president of the research company RetailMetrics, told the AP. "It looks like consumer spending is stalling."

For the next several months traffic at the nation’s major retail container ports will see weak growth or a decline compared with last year due to the nation’s economic slowdown, according to the monthly Port Tracker report released by the National Retail Federation and Global Insight.

JO ANN REPORTS 4TH QUARTER, FISCAL YEAR SALES

Net sales for the fourth quarter ended Feb. 2 decreased 2.5% to $585.9 million but the previous year included a 53rd week, which added $28.8 million to last year's net sales results. On a comparable 13-week basis, fourth quarter same-store sales increased 3.3% versus a same-store sales decrease of 6.0% last year.

Net sales for fiscal year increased 1.5% to $1.879 billion. On a comparable 52-week basis, same-store sales increased 3.5% versus a same-store sales decrease of 5.9% last year. Jo-Ann will report its fourth quarter and full-year results Mar. 12.

December, 2007

HOME SEWING ASSOCIATION SHUTS DOWN

Creative Leisure News received the following press release from HSA:

We regret to advise you that after 80+ years of service to the sewing industry, the Home Sewing Association will officially close its doors at the end of the year.

As your elected representatives, we have endeavored to keep the Association operating to fulfill its mission to "Get People Sewing!" Recent marketing programs – including Sew Trendy, Trained Sewing Educator and the Girl Scout kit promotion have shown great promise. In addition, members and sewers alike have benefited from our informative newsletters and website, together with our range of industry and consumer services.

However, we have not been able to absorb the costs – and potential liabilities – of a wrongful termination lawsuit which was filed against the Home Sewing Association in 1996. The lawsuit was tried before a jury in the state of New York in October 2006 and an unfavorable verdict was rendered against HSA.

The Board has engaged in a year-long assessment of the options available to deal with this unfavorable judgment and the additional cost of an award for plaintiff’s attorney’s fees in the case. It is our determination that the Association can no longer provide a viable level of industry service given this enormous financial burden.

Therefore, the Board of Directors of the Home Sewing Association has made the difficult decision to cease operations as of December 31, 2007. The dissolution of the Association and its remaining assets, such as the National Sewing Show, will be managed under the guidance of a chapter 7 bankruptcy of the Court of New York. Updates will be provided when information becomes available from the Trustee on the disposition of assets. We will be filing a bankruptcy petition for HSA in that court shortly.

We wish to thank you for your membership support and wish you continued success in your sewing industry endeavors in the years ahead.

Sincerely,

Dan Covitt, A.E. Nathan & Co.
Stephanie Dell’Olio, Marcus Fabrics
Martin Favre, Bernina of America
Jim Hankins, Textile Creations
Eric Herman, Air-Lite Manufacturing
Peter Isaacson, Fabric Place
Eric McMaster, Kwik Sew Pattern Co., Inc.
June Mellinger, Brother International
Johan Starrenburg, Prym Consumer USA, Inc.
Dale Sutherland, Coats & Clark
Andrew Sylvia, Cranston

xxx

 

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