Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
August 21, 2000
Vol. IV, No. 16
TABLE OF CONTENTS
In my last issue I wrote about the problem of the industry being
hurt by people posting copyrighted projects online for the world to
download. After the issue was published, I pursued the story further
for an article that will appear in the September issue of CNA
The situation is worse than I thought. For example, I found a site
where a woman had scanned and posted the complete contents of 88 of
our instruction books. 88! And when I emailed her a note, she was
furious with me! As if I were violating her constitutional right to
steal and share anything she wanted.
The bottom line: there are so many copyrighted projects online now
that cross-stitch, crochet, and plastic canvas enthusiasts need
never again buy a book from our retailers. They can craft the rest
of their lives and never have to spend a dime on another book or
Furthermore, there's no reason why this won't spread to painting and
I feel for the people and businesses in our industry who are hurt by
this, because I am hurt, too. Have you noticed at the top of this
and every CLN issue my note, "Reproduction or re-transmission,
or forwarding without permission, is prohibited."???
I am constantly amazed at the number of people who email or call me
to comment on something they read in Creative Leisure News --
and they're not subscribers.
So I'm in the same boat. If enough people do not subscribe because
they receive Creative Leisure News illegally, I'm out of business.
Here's my rule of thumb: You are welcome to distribute this and
future issues to anyone in your physical office. You are also
encouraged to forward Creative Leisure News to any industry person
who has lost his or her job.
If a company already subscribes, any additional email subscriptions,
such as for sales people in the field or employees in satellite
offices, are only $35.
Be sure to read the complete article in the September CNA.
But before we scream too much about consumers violating our
copyrights, we ought to follow the law, too.
PERLMUTTER GETS JAIL TIME
Bob Perlmutter, owner of the Pearl Arts and Crafts stores in Florida
and New York, was sentenced to three years in federal prison for
skimming money from at least one store. The 71-year-old industry
veteran was also fined $75,000 and ordered to serve two years of
supervised release after he is freed from prison.
Earlier this month Perlmutter paid $6.4 million to the IRS for back
taxes, interest, and penalties. He had pled guilty in late May to
conspiring to obstruct an IRS investigation that revealed he skimmed
millions from his chain to avoid paying taxes.
Prosecutors claimed Perlmutter was diverting as much as $10,000 a
day from his stores and used some of that money for under-the-table
payments to contractors building his 12-bedroom, 19-bathroom mansion
that is the largest home in Florida's Broward County.
The practice of skimming funds had been going on for a decade,
prosecutors claimed, but was discovered when a box filled with
$72,000 opened while it was being shipped by UPS from his East
Meadows, N.Y., store.
OUT-OF-STOCKS HURT JO-ANN'S QUARTER
The net loss for the second quarter was $10.2 million ($0.56/diluted
share), compared to a net loss of $5.5 million ($0.30/diluted share)
in the prior year. The results include an equity loss of $1 million
($0.05/share) related to the company's minority investment in
The quarter's net sales rose 5.9% to $299 million and same-store
sales increased 0.7%. Same-store sales from softlines (fabrics and
notions) fell 1.6%, while comparable-store sales for hardlines
(crafts, floral, and seasonal) increased 6.1%.
Jo-Ann's reported an operating loss for the quarter of $8.5 million
versus a loss of $2 million in the second quarter last year. Net
sales for the 26-week period increased 8% to $624.4 million;
same-store sales increased 3.2%. Comparable store sales from
softlines increased 1.2%, while same-store hardline sales rose 7.7%.
Year-to-date, the operating profit decreased to $3.1 million from $6
million. The year-to-date net loss was $7.3 million ($0.41/diluted
share) compared to a net loss of $3.2 million ($0.17/diluted share)
for the prior year. Excluding the equity loss, the year-to-date net
loss was $6.3 million ($0.35/diluted share).
Chair/CEO Alan Rosskamm said he had expected an even larger loss for
the period due to higher expenses for infrastructure investments,
softer than anticipated sales, lower margins due to a June clearance
sale, and "out-of-stock positions in basic products arising
from transitional issues associated with our recent systems
"Importantly," Rosskamm said, "we have isolated the
causes and have taken steps to improve our in-stock position by
mid-September. Nevertheless, we have lowered our internal sales
estimates for August and September by $5 million, reflecting our
best estimate of the negative impact until we have rectified the
Rosskamm concluded, "We ended the quarter with inventory levels
down $33 million from a year ago. Although we are pleased with the
successful reduction in clearance inventory, some of the reduction
resulted from the out-of-stock situation we experienced. As a result
of our current inventory position, our debt levels are also below
their year-ago levels. We remain committed to achieving our year-end
inventory reduction targets."
The partnership with IdeaForest.com will bring on-line selling
capability, enriched content, and community features to the
joann.com website, which will be re-launched next month. Officials
expect the investment to dilute second-half earnings by 25-30
During the first half of fiscal 2001, Jo-Ann Stores opened nine
superstores and two traditional stores, relocated four traditional
stores, and closed 12 smaller or underperforming traditional stores.
For the second half of the year, officials expect to open seven
superstores and to relocate one traditional store. The current store
count is 974 traditional stores and 51 Jo-Ann etc superstores.
FIRE DAMAGES CRAFT COMPANY
A four-alarm fire badly damaged Audria's Crafts and ACI
Distributing, a well known, long-time craft operation founded in
1963 and known for homecoming supplies and other products. No one
was hurt, but the store-showroom received smoke damage and two
warehouses were destroyed.
The cause of the fire is believed to be electrical. It apparently
ignited in a warehouse behind the main showroom and quickly spread
to an adjacent warehouse. The warehouses were filled with highly
flammable items such as paint, paper, wicker baskets and candles in
cardboard boxes and plastic bags.
Long-time employee Mike Landers told us last Friday the company
expects to move into temporary facilities early this week. The
company is cancelling all outstanding orders. Regarding the
wholesale business, the company does have some inventory and three
container-loads coming from overseas.
Computer records were saved. Officials are contacting all companies
doing business with Audria's and/or ACI; anyone with any questions
should call 800-433-2918 or 817-370-9515. "I can't describe the
way I feel," owner Pat Currie told the Ft. Worth
Star-Telegram. "You're looking at a $3 million fire."
WAL-MART: GOOD NEWS NOW, BUT ....
For the quarter ending July 31, income rose 29% to $1.6 billion, or
$0.36/share. Sales were $26.1 billion, up 20%. Net income for the
first six months jumped 35% to $2.92 billion, or $0.66/share.
CEO/President Lee Scott said, "In a quarter that proved more
difficult than expected for most retailers, we are pleased that our
associates were able to accomplish both record sales and earnings
for this quarter. This is our ninth consecutive quarter of earnings
in excess of $1 billion, and during the quarter we added over $7.6
billion in sales and $345 million in net income. All of our retail
divisions reported earnings growth in excess of sales growth. We do
not anticipate a slowdown in consumer spending and remain confident
that we will report record sales and earnings for the year."
However, the stock suffered after company officials warned analysts
it might not meet their third-quarter earnings projections of 33
cents/share, because of a sales slow-down toward the end of the
second quarter, and because of an accounting shift regarding layaway
purchases. Officials said 31 cents was more likely.
The stock dropped almost 8% after the warning, but has since
HANCOCK'S SECOND QUARTER IS STRONG
Sales for the 13 weeks ended July 30, 2000 increased 3.9% to $86
million. Same-store sales rose 4.8%. Net earnings were $582,000
($.03/diluted share), compared with a net loss of $759,000 ($.04) a
Sales for the first 26 weeks of 2000 increased 2.8% to $184.2
million, and net earnings were $2.8 million ($.16/share), compared
with $345,000 ($.02/share), in the first half of 1999.
CEO Larry Kirk said bank debt is down to $27 million from $37
million a year ago, and gross margins are improving. "Now that
the deflationary pricing pressures of 1998 and much of 1999 are
past, we are beginning to realize the benefits of extensive store
repositioning and remodeling, enhancements to the merchandise mix,
and a more effective advertising plan. We are also investing in a
company-wide customer service initiative that includes performance
incentives for every retail salesperson.
"Today," Kirk continued, "our assortments are even
more balanced with increased commitments to growth categories such
as home decorating and accessories, which do well when new home
building is increasing or when consumers opt to update their
"Quilting, children's wear, and bridal/party are also growth
areas that attract a broader consumer following," Kirk added.
"Apparel piece goods, in decline for several years, are
attracting more interest lately, and a good sell-through in spring,
2000 resulted in minimal markdowns at season's end.
"Although our strategy for fashion apparel fabrics is much more
narrow and focused than in years past, the new print cycle just
ahead will favor the category with new designs and fresh
colorations," Kirk predicted.
During the quarter, Hancock opened two stores and closed six. At
July 30, 2000, the company operated 448 stores in 42 states and
supplied more than 100 independent wholesale customers.
TOUGH QUARTER FOR AMES
Ames recorded a consolidated net loss of $22.1 million, or
$0.75/share for the second quarter which ended July 29. The same
period a year ago showed loss of $21.5 million, or $0.78/share.
Sales rose 1.4% to $872 million, but same-store sales dropped 2.5%.
For the first half of the year, Ames lost $51.2 million, or
$1.74/share. This compares to a net loss of $51.2 million, or
$1.98/share, for the same period last year. Last year's loss of
$1.98 per share included a negative adjustment of $0.04 which
reflected the cumulative effect of the adoption of SAB No. 101 with
respect to the method of accounting for layaway sales.
Net sales for the first half, which ended on July 29, 2000, were
$1.7 billion, up 1.6%. Same-store sales, however, dropped 0.9%.
Chair/CEO Joseph Ettore blamed unseasonably cool, wet weather but
"control over both inventories and overhead during the period
thereby cushioning the impact of the sales shortfall. Our current
inventory levels, and [our] ability to respond quickly to changes in
the marketplace, position us well for the rest of the year."
Ames opened 7 stores in July, including its first in Chicago.
Scott Pederson, founder of the stock site,. Epredict.com, issued a
sell recommendation for Ames last Friday and earlier Bank of America
Securities downgraded Ames to Market Perform.
MORE ACCI/INRG COMMENTS
1. "We had a terrific ACCI show. We were up 30% in sales over
last year. ACCI is a welcoming show and a comfortable environment to
work with our buyers." Christine Meier, DMD Industries
2. "For what it is worth, we had a good INRG show and most of
the shops seem to be very positive and optimistic. There was a
noticeable absence of large customers, but other than that, things
seemed like normal.
"It took a few years to get over seeing that show without Craft
World. The smaller distributors seem to be taking up the slack and
starting to do a pretty good business.
"I think the cross stitch business has hit bottom and is
starting to come back at shop level; my guess is the business will
continue to deteriorate at the major chains for the next few years.
"Our new products were well received and we just hope that we
can justify these new items by selling them primarily to the shops.
With the exception of A.C. Moore and Hobby Lobby, we don't expect
any of the other chains to put [out] anything new in in the
foreseeable future, although it looks like Michaels may look at some
new open stock cross stitch products.
"I am encouraged that one of the smaller distributors currently
may become the next Craft World or the next Leisure Arts if the
business does rebound as we anticipate." -- Mid-sized
3. "There was a huge increase in theft of product from our [ACCI]
booth. We actually called the police because of food service workers
stealing handfuls of markers at a time.
"But what was more troubling was the number of retailers who
would take product from our displays without asking. I'm talking
handfuls of product, one-of-a-kind-samples, and expensive sets (of
which we had only one each at the show).
"Often, if we casually confronted them, they would deny taking
"If I were to go in to their stores, take product off the
shelves, and put in my handbag, that would be theft. Why do they
feel it is OK in a show environment?
"I spoke to other vendors who encountered the same phenomenon.
"On a positive note, this is a show that was crying out to be a
3-day show! And it was great from that perspective. The last day of
ACCI had always been a washout. And, this year, we wrote to the last
minute. I only wish they would continue with this format, although I
understand it will return to 4 days next year." -- Mid-sized
COMMENT ON THE COPYRIGHT PROBLEM
In reaction to CLN's last issue with the report on illegal
posting of copyrighted material on the Internet, an industry
"I understand why you focus on how it hurts stores because of
your audience, but I believe it's equally important (and more
impressive reading) for the industry to realize that SUPPLIERS have
already lost several millions of dollars a year in time, technology,
research & development, designing, sales, etc., due to this
Now, if suppliers are losing that much money, good retailers will
soon calculate how much THEY are losing by not having that audience
to pull from."
FLOWERS. Cuttings, the new floral line from Aldik that
mimics the slight imperfections of home-grown garden flowers, was
cited by the Wall Street Journal ... Online floral-gift retailer
FTD.com posted a 4th-quarter loss of $4.3 million, despite a 93%
rise in revenue to $35.6 million. Officials predict the firm will
post a profit and positive cash flow by the end of its next fiscal
SEWING. The Home Sewing Association's National Sewing Show
is September 26-28 in Las Vegas. Classes begin September 25.
Highlights include HSA's annual meeting and the Retailer Rap
session. Call 516-596-3937 for show info, 888-746-7482 for hotel
LAWSUITS. A New Jersey judge ordered Wal-Mart to pay a former
cashier more than $2 million in a default judgement of an
anti-discrimination lawsuit which claimed the ex-employee was
harassed and fired after a boss discovered that he was undergoing a
male-to-female sex change, reported Chain Store Age.
GOLF. The HIA Foundation, a non-profit charity arm of HIA, is
seeking sponsors for the 10th annual HIA Foundation Golf Outing to
be held Wednesday, January 26, 2001, just prior to the trade show.
The Foundation gives financial support to non-profit organizations
that promote crafts education. Email HIA's Executive Director, Pat
Koziol, at firstname.lastname@example.org.
GLASS. The next Art Glass show is June 22-24, 2001 in
Orlando. Considering consumers' increasing interest in glass and the
number of products-kits at this year's show, craft retailers should
consider attending. Contact AGSA at P.O. Box 3388, Zanesville, OH
43702-3388. Call 888-866-AGSA; fax 740-452-2552; email email@example.com;
or surf to www.agsa.org.
STORES. During its second quarter, ShopKo opened 12 new
Pamida stores. In October, ShopKo will reopen the recently purchased
Places stores and another 12 new Pamidas. When that's accomplished,
ShopKo will have expanded Pamida's total square footage by 42%.
AUCTION. The inventory of Designer Accents will be auctioned
RANKINGS. In the annual ranking of specialty stores (by 1999
sales) by the National Retail Federation, Toys R Us was 3rd,
Michaels ranked 25th just ahead of Footstar and just behind
Musicland. KB Toys was 28th, Jo-Ann's was 38th, and Hobby Lobby was
BACK TO SCHOOL. According to a new survey by the Macerich
Company, by mid-August, 73.8% of students and parents have completed
their back-to-school shopping, and 16.2% shop in or before July. The
national survey shows spending is up $65 to $394 for clothes and
books .. A survey conducted by HIA on its i-craft.com website
revealed that families spend an average of $25 per child for kids'
craft activities in school. 92% said their kids bring their craft
interests from school back home.
RANDOM VIEWS, RANDOM QUOTES
1. The Audria fire brings to mind other industry fires in the
industry. Walnut Hollow had a devastating fire in the 1980's and
President Dave Ladd later told me about the support he received from
Land's End, the huge mail order company that is Dave's neighbor in
Dodgeville, Wisconsin. Until then, I had used Land's End and L.L.
Bean pretty interchangeably; after Dave told me about the company
offering furniture, etc., I've used Land's End exclusively.
The other story isn't so nice. A small floral accessories business
burned down and investigators said it was arson. Apparently when
arson is the cause, the police assume the owner is guilty and
insurance companies refuse to pay. It was a nightmare for the owners
until the police caught the culprit, a disgruntled ex-employee.
2. Here's a sign of the times. Burpee, probably the strongest
brand name in vegetable and plant seeds, has expanded into live
plants. Why? "Lack of [consumer] time, patience and experience
are the most commonly cited reasons, as well as the booming
economy," the Associated Press reported, "that has people
willing to spend extra for instant blooms."
3. Along those same lines: Jim Scatena, now President of
FloraCraft and a former VP at Wilton, described how, over the years,
Wilton changed the gingerbread-house kit Wilton sold each fall. Each
year the company did more of the work, so the consumer had to do
Jim carried that lesson to FloraCraft. The company used to have a
Halloween project whereby consumers would make a fun tombstone. It
was little more than a project sheet that called for a sheet of
Styrofoam brand plastic foam that the crafter cut, painted, etc. Now
FloraCraft, not the consumer, cuts it, paints it, and even embosses
"Here Lies" on it.
The moral of the story? Consumers want to craft as much as ever, but
often they don't have as much time for it. Something to keep in mind
when developing new products.
4. During the ACCI show, Michaels' CEO, Michael Rouleau,
talked about the industry needing to work together better. For
example, when a magazine article or television show highlights a new
product, that product is readily available in stores.
He's right. Tom Ware of Bagworks told me sometimes companies ship
product to a tv show but aren't told when the products are used. One
day Bagworks was deluged with calls when a product was used on
Martha Stewart's show. And re-runs: a product might be readily
available when it's showcased on tv, but long gone when the show is
re-run six months later.
COMPUTERS. GoliathFalls.com, the Chicago-based
business-to-business site serving independent retailers, received a
$10 million investment from computer giant, Compaq. It's $5 million
in cash and $5 million towards the purchase of Compaq's Internet
infrastructure and access equipment. The Compaq systems, officials
say, "will enable Goliath Falls to empower independent
retailers with the use of a new PC to access Goliath Falls'
procurement site." The site currently sells a wide variety of
variety-store-type supplies, but will soon be adding crafts.
QUOTATION. "Compaq's investment in Goliath Falls is
evidence that Chicago is beng recognized as a high-tech
leader." -- Richard M. Daley, Mayor of Chicago.
ACQUISITION. Artisan Network acquired iTheo.com, an online
marketplace that showcases approximately 10,000 works of original
art from member artists. It joined the Artisan Network family which
includes ArtAffinity.com, an education-display site for artists;
MisterArt.com (an e-commerce site); and Studio Source, which enables
other sites to sell the MisterArt inventory at their prices. Those
sites utilizing Studio Source will now be able to sell the art
exhibited on iTheo.com. Among the other major sites already using
Studio Source are IdeaForest.com, ArtMecca.com, and other art-,
craft-, and education-related sites.
PREDICTION. J.P. Morgan issued a report predicting that
brick-and-mortar retailers will dominate e-commerce, Dow Jones News
reported. Strong brand names and lower costs for acquiring customers
and purchasing goods (thanks to large volume) are the keys, the
OPEN. HomeDecorShowcase.com is up and running, offering
finished pieces by some of the most well known painters and crafters
in the industry, including Pat Ciccolella, Dorothy Dent, Doxie
Keller, Heidi Ott, and Judy Westegaard. Categories include Carving
& Sculpting, Furniture, and Portraits, while Ceramics &
Porcelain, Glass, Masters Reproductions, and Textiles & Weaving
will be added soon. The site is operated by popular industry veteran
COPYRIGHTS. The courts seem are siding with artists,
publishers, etc., in the Internet copyright wars. A federal judge
ruled in favor of Hollywood movie studios in their lawsuit to stop a
web site from giving out software that descrambles the code meant to
prevent DVDs from being copied. The judge ruled that posting the
code violates federal copyright law.
NEW. The popular and well known industry veteran, C Boyd, has
a website for his rep firm: http://craftreps.com/index.html.
SURVEY. BizRate.com's Consumer Online Report for the first
quarter says online retailing sales rose 12% compared to a year ago.
Categories showing above-average growth were Entertainment, Computer
Goods, and Gifts and Flowers. The most dramatic losers were Food and
Wine and Toys and Hobbies, down 72%. Women comprised 54% of new
THE CREATIVE NETWORK: JOB OPENINGS
The only personnel recruitment firm specializing in our industry has
the following job openings. Call 360-834-0802; fax 360-834-0702;
email firstname.lastname@example.org; or check
ATLANTIC: Channel Marketing Manager ... Product Manager.
MID ATLANTIC: Administrative Assistant ... Director of Sales
& Marketing ... VP Account Executive (sales) ... VP Marketing.
MID CENTRAL: Product Designer.
NORTH CENTRAL: Art Director (3 positions) ... Associate
Designer/Product Development ... Buyer/Scheduler ... Copywriter ...
Director of Sculptural Team ... Director/General Manager ...
Operations Manager ... Oracle Developer/Webmaster ... Product
Development/Designers ... Product Manager/Director of Marketing (2
positions) ... VP Product Development (collectibles).
PACIFIC: Director of Product Development ... Marketing
Manager ... Media Design Liaison ... Store Merchandising Manager ...
SOUTH EASTERN: Sr. VP of Sales.
CREATIVE NETWORK: JOB OF THE MONTH
POSITION: Product Manager ... LOCATION: California ...
SALARY: to $70K ... DESCRIPTION: Responsible for the
conceptualization, development, and execution of lines. The category
is stationery/scrapbooking related. Develop product from the concept
stage through design, sampling, costing, and packaging ... QUALIFICATIONS:
Must have experience in the stationery/scrapbooking industry and
possess strong creative abilities and analytical marketing skills.
Overseas sourcing experience needed.
For more about these positions, contact The Creative Network at
THE CLN RETAIL INDEX
A. C. Moore (ACMR). Last*: 8 1/2 ... Change**: +1 1/16
Ames (AMES). Last*: 5 3/16 ... Change**: -15/32
Hancock Fabrics (HKF). Last*: 4 1/2 ... Change**: +7/16
Jo-Ann Stores (JAS.A) [a]. Last*: 7 1/16 ... Change**: -1/8
Michaels (MIKE). Last*: 47 ... Change**: +1/16
Rag Shops (RAGS). Last*: 2 5/8 ... Change**: +13/16
Wal-Mart (WMT). Last*: 50 1/2 ... Change**: -2 7/16
CLN Retail Index. Last*: 125.375 ... Change**: -1.6%
Dow Jones Index. Last*: 11,046.48 ... Change**: +2.6%
* August 18 ** from August 4 [a] voting share Note: Prices are
exclusive of dividends
THINGS THAT TOOK YEARS TO LEARN
Words of wisdom emailed from a friend:
1. If you had to identify, in one word, the reason why the
human race has not achieved, and never will achieve, its full
potential, that word would be "meetings."
2. There is a very fine line between "hobby" and
3. People who want to share their religious views with you
almost never want you to share yours with them.
4. You should not confuse your career with your life.
5. No matter what happens, somebody will find a way to take
it too seriously.
6. When trouble arises and things look bad, there is always
one individual who perceives a solution and is willing to take
command. Very often, that individual is crazy.
7. Nobody cares if you can't dance well. Just get up and
8. The most powerful force in the universe is gossip.
9. The one thing that unites all human beings, regardless of
age, gender, religion, economic status, or ethnic background, is
that, deep down inside, we ALL believe that we are above average
10. The main accomplishment of almost all organized protests
is to annoy people who are not in them.
11. A person who is nice to you, but rude to the waiter, is
not a nice person.
12. Your friends love you anyway.
Note: Creative Leisure News is normally published on the first
and third Mondays of each month. Because of Labor Day, your next
issue will be Tuesday, September 5th.
Have any rumors you need checked? Company news or comments on
industry issues? Call Mike Hartnett, in confidence, at 309-925-5593;
fax 309-925-9068; or Email email@example.com.