Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
September 4, 2000
Vol. IV, No. 17
TABLE OF CONTENTS
A few months ago I recommended a piece in the New Yorker,
"Clicks & Mortar", as the best article I'd ever read
about the Internet and e-commerce. It still is, and is available on
the author's website, www.malcolmgladwell.com.
Since then, Gladwell published a best-selling book, The Tipping
Point, which gives a fascinating look at how trends begin and
grow. Thoughtful reading for any vendor who would like to see a new
product line become the next scrapbooking, fabric painting, or cross
To read an interview by eMarketer in which Gladwell briefly
describes his theories, go to http://www.emarketer.com/enews/20000821_gladwell.html?ref=wn.
Why did fabric painting languish for years, then suddenly become the
scrapbooking of the 80's? People have made scrapbooks for
generations. Why such interest now? The Tipping Point can
give you some insights.
MICHAELS: STRONG SECOND QUARTER
Net income the second quarter which ended July 29th was $5.7 million
($0.16/diluted share), compared to $958,000 ($0.03), excluding the
after-tax effect of a non-recurring charge, in the same period last
year. Eleven analysts polled by First Call expected the company to
earn 13 cents a share, CBS Market Watch reported..
Total sales for the quarter increased 22% to $438.4 million.
Same-store sales were up 8%.
During the company conference call with Wall Street officials,
President John Martin listed the strongest categories: ribbon, +37%;
crafts, +25%; custom framing, +16%; and art supplies, +10%. He cited
candle- and soap-making, scrapbooking, glass, and bridal supplies.
CEO Michael Rouleau said, "We believe we are very well prepared
for a successful Christmas selling season. We have made significant
progress with the management of our inventory. Our average inventory
per Michaels store is $1.035 million, down 1% from the $1.046
million we reported for the first half last year, and on track
towards our year-end forecast of 5% under last year."
During the quarter, Michaels opened 13 new stores, relocated 5, and
closed 2 -- plus the company opened 7 new Aaron Brothers stores and
relocated 1. The store count is now 600 Michaels and 104 Aaron
AUGUST HEAT MELTS SALES FIGURES
A slowing economy, hot weather, and disappointing back-to-school
sales and promotional events created gloomy same-store sales figures
for most retailers.
One chain bucking the trend was Hancock Fabrics, whose
same-store sales grew 5.3%. CEO Larry Kirk stated, "Sales in
comparable stores during August continued to reflect the favorable
trend that we began to see in December of last year. The sales gains
have been generally broad-based; however, home decorating products
and a more focused fashion apparel category are particularly
Michaels' same-store sales grew only 1%, the company's
smallest increase in many months. CEO Michael Rouleau said,
"While we are pleased with the customers' early response to our
fall and Christmas merchandise offerings, we did experience a sales
shortfall during the second week of August, when customers did not
respond to the month's largest promotion."
Wal-Mart's overall sales increased by more than $1 billion
again in August, but its same-store sales increase, 5.8%, was only
slightly more than half of what it was for August, 1999.
Ames' same-store sales fell 0.5%. Chair/CEO Joseph Ettore did
not list crafts as one of the categories that performed well.
ShopKo, owner of the Pamida chain which carries some
craft supplies, reported same-store sales dropped 1.1%. "The
company continues to face a very difficult retail climate in its
markets," a spokesperson said.
Duckwall/ALCO's same-store sales rose only 1.8%. The company
cited various product categories as strong sellers, but crafts was
not one of them, and back-to-school products "lagged behind
expectations," a spokesperson said.
Kmart's sales rose 2.8%, which new Chair/CEO Chuck Conaway
Target's sales rose 3.2% and warned analysts that third-quarter
earnings/share would probably "decline somewhat" but
growth should resume in the fourth quarter. Just a few weeks ago the
company had told analysts it would meet or exceed their estimates
for the remainder of the year, CBS Market Watch reported.
Comment: As we reported previously, recent research shows
consumers are buying school products earlier than ever. Perhaps
retailers should readjust expectations for July and August.
INTERNET COPYRIGHT NEWS
In recent issues, we've reported on the problem of consumers
scanning and posting copyrighted projects on the Internet, thus
depriving retailers, publishers, and designers of revenue that
rightfully belongs to them. Some recent developments:
1. Jim Hedgepath of Pegasus Originals set up a list for
companies who want to keep up with sites that appear to be
infringing on copyrights. "This list allows industry members to
report sites to everyone on the list with one email and then
everyone on the list can check the site to see if their designs are
being ripped off," Jim says. The address is http://stitching.com/copyright.
"There are about 20 companies on this list now and we are
seeing about three new sites a week reported. Plastic canvas books
are being seen a lot now." Jim adds.
2. As we reported earlier, Jim and others are planning to
publish a book of cross-stitch designs, which will be distributed by
Hoffman Distributing. All proceeds will go to the legal fund set up
to combat this Internet copyright problem. "... but we need a
publisher who can front the money for printing costs either as a
contribution to the industry or until sales can pay back the
printing costs," Jim said, who hopes the book can be unveiled
in time for the HIA show in Anaheim and the Needlework Markets show
in Nashville in early 2001.
3. The fund, set up under the International Needlework
Retailers Guild, has collected about $1,500 since it informally
began at the INRG show in late July.
4. The Associated Press published its article on our
industry's Internet copyright problem and it was carried in a wide
variety of newspapers. (The AP sends its articles to 1,550
newspapers.) There was nothing in it that we haven't already
reported, but all the national publicity should educate more
consumers. From the article: "We're not looking to put
Grandmother in jail, but Grandmother is stealing from us," Gary
Gardner, president of Great Notions, told the AP.
5. The Napster trial begins the week of October 2nd. A
three-member panel of a federal appeals court will hear the case
between Napster (and its song-swapping software) and a number of
major music industry companies. The verdict could set precedents
that apply to our industry.
6. Reminder: A more thorough, comprehensive description and
analysis of the problem will appear in the September issue of CNA
magazine. For more information on the INRG legal fund, contact Jim
Hedgepath at email@example.com.
HSA TAKES ACTION ON COPYRIGHT
A note from Joan Campbell, Executive Director of the Home Sewing
"As you know, the Home Sewing Association has been operating
the Embroidery Software Protection Coalition for about a year now.
Its main purpose is to educate -- both consumers and retailers -- on
the copyright laws and how their violation hurts everyone in the
"We've seen some results from our efforts, but know that it
will be an ongoing activity. In many cases it's an innocent mistake
(after all, how many of us have copied articles from magazines and
passed them along?) and the violators apologize for their actions.
But in some cases it's a blatant illegal activity and the
lawbreakers seem to thumb their noses at the system.
"We have a detective who 'lurks' in chat rooms and on bulletin
boards, uncovering violators and offering educational information on
what is and is not legal. He has been threatened numerous times.
It's amazing how many people think it is their 'right' to obtain
software for free. I wonder how they will feel someday if no new
designs are available because there's no financial incentive to
MEDIA HIGHLIGHTS SCRAPBOOKERS'
The Dallas Morning News published a major article on
scrapbooking. Among the highlights:
1. Free-lance writer Peggy Martin's enthusiasm overcame her
objectivity; she said she herself had become "hooked" on
2. The fourth annual Great American Scrapbook Convention (GASC),
held this summer, drew 5,800 attendees.
3. The Dallas area now has more than a dozen scrapbook stores, and
more than half a dozen opened just this year.
4. The article cited storage products and luggage designed to
transport scrapbooking supplies to crop parties, crop nights at
stores, etc. The manufacturers featured were Generations by Hazel,
Crop in Style, and Leeco Industries, with some products costing
5. Cropping clubs, such as the Texas Bluebonnet Scrappers and
the DFW Scrappers, are popping up.
6. Retailer Lee Ann Johnson (Creative Scrappers) in Mesquite, Texas
offers "cropping getaways" for groups to use the crop room
in her store -- even arranging catered meals and hotels for
7. The article described a GASC attendee who bought a floor model of
The Keeps Sake Creation Station, a specially designed, maple
and cherry scrapbooking desk for $1,299.
Read the article at http://dallasnews.com/lifestyles/hg/160022_scrapbook_01ho.html.
WALL STREET PRAISES, WORRIES ABOUT
Despite better than expected quarterly earnings, Michaels' stock
tumbled 12% the day after the data was released and a conference
call was conducted with analysts. Analysts appear confident about
Michaels' long-term growth potential, but some thought reports of a
disappointing "Dollar Days" sale last month indicated a
possible slowdown in the near-term sales growth. The stock tumbled
again a few days later after Michaels released its August sales
report (see article above).
Wachovia cut its rating to Neutral from Strong Buy,
saying "We think the potential for upside surprise has
disappeared for third-quarter earnings and diminished for
fourth-quarter results as well," CBS Market Watch reported. AG
Edwards also downgraded Michaels to Accumulate. A Robertson
Stephens analyst praised Michaels' current execution, but expressed
concern about slowing consumer trends and Wall Street's high
expectations. The company's rating remains Long-Term Attractive.
Not all analysts were worried, though. Southwest Securities
reiterated coverage at Buy, with a price target of $53, and
Pacific Crest reiterated its Strong Buy rating, with a target
WAGES. Thanks to a pending compromise in Congress, you can
expect a 50-cent rise in the minimum wage, effective January 1,
2001, and another 50-cent rise a year later. As part of the package,
business meals and entertainment deductions will increase from 50%
ELECTION. The new board of directors of International
Needlework Retailers Guild are President Lois Hoeft, A Stitch In
Time; VP Dee Jenkins, Dee's Needleworks; Secretary Ginger Edwards,
Ginger's Needlearts; and Treasurer Susan Tyler, Susan's Stitchery.
Committee chairs include Saundra Cox, Membership (The Finishing
Touch) and Carol Grant, Education (Cross My Heart). Sharon
Wainwright, Sew Original Needlearts, is past president.
PEOPLE. Erik Mandleberg has left DMC to take a position as
Sales VP for Natural Science Industries with the mission of growing
its new craft division ... Joseph Pollicino was named to the Ames
board of directors. He has 40-plus years of retail and banking
experience, most recently as vice chair of the CIT Group.
FOR SALE. Easel manufacturing company is for sale. For more
information, contact Mike Hartnett, in complete confidence, at
309-925-5593 or email firstname.lastname@example.org.
ACQUISITION. September 9th is the reported date for a major
industry company to be sold -- to another industry company.
STORES. After moving into Houston and Dallas, Aaron Brothers
has its sights on Denver.
APPLIANCES. Wal-Mart will test-market selling major General
Electric appliances in 12 stores. The stores will display about 40
appliances, plus a kiosk which will offer another 150 appliances. No
word which departments it will shrink to make room for the
AMES. FMR Corp. lowered its stake in Ames to 6.2%; in early
May FMR had reported a 11.356% stake, Dow Jones News reported ...
Moody's Investor Service confirmed the debt rating for Ames;
however, the company changed the rating outlook from stable to
negative, "due to higher debt levels and decreased financial
flexibility to handle potential adverse conditions in the near
term," Dow Jones News reported.
HIA. Members can go to hobby.org/2001 to make hotel
reservations for the Anaheim show -- or call 800-388-8107.
Reservations for non-members will be taken starting October 1.
DATA. Results of the July survey at the HIA website,
hobby.org, indicate consumers are spending more time crafting -- and
computing -- than before. 54% of respondents said they spend up to
10 hours/week crafting; that up from 46% a year ago.
ACCI. The 2001 show is July 20-23. Call 888-360-2224, ext.
3131, or visit accicrafts.org.
AWARD. Winners of the Scott Ladd Memorial Award at ACCI in
July were Accents Unlimited, Back Street, Caron, Craft Wholesalers,
DecoArt, Needlemagic, Prime Arts, Ryco Trimming, What's New, Wilton,
AWARD. Communications Concepts gave an Apex award for
excellence in graphic design, editorial content, etc., to HIA for
its materials created for the Crafts. Discover Life's Little
Pleasures branding campaign.
SCHOOLS. Interested in the school market? The National School
Supply & Equipment Assoc. issued its annual State of the School
Market, available to non-members for $99. Call 800-395-5550.
DESIGN. The annual Educational Seminar, "Partners in the
Creative Life", of the Society of Craft Designers will be
October 4-7 in Minneapolis. Silvana Clark, publisher of Taming the
Marketing Jungle, is the keynote speaker. Congrats to SCD on its
25th anniversary! Call 740-452-4541; email email@example.com, or
visit craftdesigners.org for more info.
OFFICERS. Art Glass Supplies Assn. Int.'s offers for
2000-2001 are Chair Ron Bearer, Art Glass House; Vice-Chair Randy
Wardell, Wardell Publications; Treasurer Gene Mayo, Stained Glass
Images; and Secretary Steve Trebacz, The Glass House.
RANDOM VIEWS, RANDOM QUOTES
1. Ever walk the aisles of a competitor and write down
prices? If you introduce yourself to the manager, most won't mind.
Others, though, will throw you out. In those cases, how about a cell
phone? Call your store and dictate prices you see. Cell phones are
so common now, retailers don't think twice if they see someone in
their aisles talking on the phone.
2. Craft Cove, a long, long-time independent retailer in
Peoria, Illinois, is having a "Going Out of Business"
sale. Michaels and Hobby Lobby had moved into the area and an
Illinois chain, Jeffrey Alans/PGI, is expanding its Peoria store.
Meanwhile, another long-time retailer in the East called, saying
she's probably going to close. Michaels and Jo-Ann had moved nearby
and despite her wealth of craft knowledge and customer service,
customers were going to the chains for the lower prices.
It used to be, a good general craft independent could compete
successfully with the chains. Now, you have to be an outstanding
craft retailer to compete.
3. An old friend, Jeff Horner, has recently taken a position
with the ad agency, The Borenstein Group. I don't claim to be an
expert on advertising, but over the years Jeff has created some of
the most memorable, creative, and effective ads I've ever seen in
this industry. If you need help with your marketing, branding, new
product introductions or advertising, call Jeff at 703-385-8178,
ext. 211 or email firstname.lastname@example.org.
4. Perhaps I'm too sensitive, but it seems the national media
is once again taking a vaguely condescending attitude towards our
industry. Some of the media's newspaper articles and tv or radio
reports about our Internet copyright problem made no distinction
between needlepoint and cross stitch, and implied that only older
women -- "grannies" -- do needlework. And somehow,
"grannies" stealing copyrighted designs is kind of cute.
Excuse me? Aren't these the same national media who recently
reported how Julia Roberts and other movie stars have taken up
crochet and other crafts? Julia Roberts is a granny? And since when
is anyone breaking the law "cute"?
Back in the 80's, at one point Michaels was going gangbusters --
named by USA Today as one of the best performing stocks on Wall
Street. So Forbes published a profile. It was quite positive, but
the headline read: "Wiggle Eyes, Anyone?"
5. Friends told me mums and, yes, mum-making were huge in
Texas stores. I had no idea how big until a recent article in the
Dallas Morning News. An example: "Materials: silk roses, silk
thistles, real dried mums, glass pebbles, fake fur, animal print
tissue paper, gold Christmas balls, black and white ceramic beads,
gold Mardi Gras beads from home, silver accents, cat eyes from the
hobby store's doll aisle, pillow tassels, and other eyes made from
Amy's Incredible Shrinking Plastic. Cost: just under $100. Time of
preparation: seven hours. Tools: mainly a stapler, some glue gun
work and lots of string to tie. Materials available at hobby
To read for yourself, go to http://dallasnews.com/lifestyles/hg/160184_mum_01hg.html.
MICHAELS' REDESIGNED SITE: A WORK
During the quarterly conference call with Wall Street analysts, CEO
Michael Rouleau talked at length about the expanded website,
The site received about 18 million hits and 300,000 visitors since
the launch July 28th. Visitors are spending twice as much time at
the site, too.
The site is now selling art prints -- 16,000, compared to a typical
store's 700. Surfers can browse by Artist, Cultural, Decor,
Geography, Room, Style, Subject, 1 Primary Color, 2 Primary Colors.
Immediate plans call for the introduction of art supplies -- 16,000
sku's -- for sale in early November, then 10,000 art & craft
books later in the month. The plan for 2000 then calls for the
introduction of 700 craft kits later in the year.
All merchandise will be shipped from one facility, a distributor's
Rouleau said the site's primary goals are education and driving
consumers into Michaels stores. The second priority is selling
PARTNERS. Studio Source (www.studiosource.com), the
business-to-business company that builds and operates online art
stores for other Internet sites, is seeing its client list growing
substantially. New clients include Binders, the Atlanta-based retail
chain, and IdeaForest.com, as we reported in our last issue. Other
new clients include Artnet.com, an information and
e-commerce-auction site, and eCampus.com, an online college
bookstore. Studio Source enables its partners to offer their
customers a complete inventory of supplies while Studio Source
handles all technology, product fulfillment, and customer service.
Look for additional, very well known clients to be added soon.
REDESIGNED. Marymaxim.com, one of the leading needlework
e-commerce sites, has updated its site, which sells kits, supplies,
and books, including numerous private label products and kits. It
loads quickly and is very easy to navigate. (Comment: Mary Maxim's
experience with mail order and its mail order-and-retail base gives
us confidence that this e-commerce site will be one of the
industry's long-term winners.)
TAXES. The California legislature passed a bill aimed at
collecting California's 7.25% sales tax for purchases over the
Internet. The governor has not said if he will sign or veto the bill
... According to tax economist Donald Bruce, online sales could cost
US states $11 billion in sales tax revenues in 2003, eMarketer
QUOTATION. "Summer's best decorating ideas from
Craftopia.com. Craftopia.com is offering summer's most popular home
decorating accents--some for less than $5! Whether you keep them for
yourself, or give them as a gift, you're sure to love our scented
decorative-candle collection, exquisite paper flowers, and rustic
Mosaic Sun End Table Kit. Click below and see!" -- from the
email newsletter of MarthaStewart.com
PREDICTIONS. In its 14th annual Communications Industry
Forecast, the media merchant bank, Veronis Suhler, predicted
that the average daily consumption of media will grow from 9.3 hours
in 1999 to 10.4 in 2004 and by then, Americans will spend more hours
annually playing video games (161) and using the Internet (228) than
they spend reading daily newspapers (147), books (92), and magazines
(77), eMarketer reported. Veronis Suhler once owned Crafts and other
PJS Publications magazines and sold them to the current owner,
ADVICE ON OFFERING FREEBIES
An obvious, successful way to market your products or your store is
to offer a free kit or pattern on your website. Sometimes too
successful, as Rick Miller of Miller Woodcrafts discovered.
Rick offered a photo and project instructions at his site,
millerwoodcraft.com, but surfers had to send an SASE for the
pattern. It didn't produce a lot of traffick, so Rick offered a free
pin kit with the pattern and instructions. Consumers had to complete
a short questionnaire about the site in order to receive the kit.
About 450 customers responded in May and June. "This feedback
was very helpful, traffic and sales increased, and life was
wonderful," Rick said.
In July he changed to a new pin, a cute little frog, which generated
about 400 requests in two weeks, then tapered down to about 10 a
day. To drive additional traffic, Rick went to various craft sites,
including CraftersCommunity.com, looking for sites which would link
to his site. He registered with MyFree.com.
On July 17th, he started receiving 60 requests an hour. By the
afternoon of the 18th, it was up to 900 additional requests. On the
morning of July 19 there were 5,400 requests, which jumped to 9,000
by that afternoon.
The volume shut down his Netscape, preventing him from receiving any
orders. When the computer was fixed, there were another 12,000
By the time Rick took the free offer off his site, he had more than
Rick thinks his total cost will be about $15,000. "I'm staying
optimistic though. I figure we should get a lot of new customers out
of this," Rick says.
"In retrospect, I probably shouldn't have registered with
MyFree.com," Rick added. "Once you get listed with one of
those sites there's about 5 or 10 more that list you. That's when it
really goes crazy."
THE CREATIVE NETWORK: JOB OPENINGS
The only personnel recruitment firm specializing in our industry has
the following job openings. Go to ACCI #9806 or call 360-834-0802;
fax 360-834-0702; email email@example.com; or check
ATLANTIC: Channel Marketing Manager ... Product Manager.
CENTRAL: Creative Director/Designer ... Design Department
MID ATLANTIC: Sr. VP Marketing ... Director of
Sales/Marketing ... VP Account Exec. (sales) ... VP Marketing ... VP
MIDWEST: Editing Manager (web, book content).
NEW ENGLAND: Assistant. Art Director/Designer.
NORTH CENTRAL: Associate Designer/Product Developer ...
Branding Manager ... Buyer/Scheduler ... Director of Sculptural Team
... Director of Sports Collectibles ... Director/General Manager ...
Operations Manager ... Oracle Developer/Web Master ... Product
Development/Designers ... Product Manager/Director of Marketing (2
positions) ... Programs Manager ... VP Product Development
PACIFIC: Director of Product Development ... Marketing
Manager ... Marketing-Product Manager ... Media Design Liaison.
CREATIVE NETWORK: JOB OF THE MONTH
Position: VP Marketing ...Location: Mid Atlantic
...Salary: $90-110K, plus benefits ... Job Description:
Develop strategic marketing plans, plan-o-grams, programs to address
customer's needs and create new business opportunities; P&L
responsibilities ... Requirements: Proven leadership ability;
extensive merchandising experience; a background in product
development and plan development; knowledge of major customers;
strong creative and trend forecasting abilities; ability to put
together lines; knowledge of advertising and promotional pieces;
product development experience; and the ability to understand new
and existing markets.
Position: Design Department Manager ... Location:
Central/Atlantic ... Salary: $45-55K, plus relocation and
benefits ... Job Description: Responsible for all aspects of
creative design and design projects/programs: product testing;
design finished samples; supervise in-house and free-lance
designers; design show booths; assist in the creative marketing
effort for existing and new products; product testing; creating new
techniques, create samples; and attend trade shows. For more about
these positions, contact The Creative Network at 360-834-0802.
THE CLN RETAIL INDEX
A. C. Moore (ACMR). Last*: 9 3/32 ... Change**: +19/32
Ames (AMES). Last*: 5 3/16 ... Change**: UNC
Hancock Fabrics (HKF). Last*: 5 1/8 ... Change**: +5/8
Jo-Ann Stores (JAS.A) [a]. Last*: 6 11/16 ... Change**: -3/8
Michaels (MIKE). Last*: 36 3/8 ... Change**: -10 5/8
Rag Shops (RAGS). Last*: 2 1/2 ... Change**: -1/8
Wal-Mart (WMT). Last*: 48 13/16 ... Change**: -1 11/16
CLN Retail Index. Last*: 113.781 ... Change**: -9.2%
Dow Jones Index. Last*: 11,237.78 ... Change**: +1.7%
*September 1 ** from August 18 [a] voting share Note: Prices are
exclusive of dividends
SIMPLIFY ... SIMPLIFY
A note from Tim Mulvey of Houston Art:
Reading your latest newsletter this morning, the article,
"THINGS THAT TOOK YEARS TO LEARN", reminded me of the
e-mail I received last week:
During the space race back in the 1960's, NASA was faced with a
major problem.The astronauts needed a pen that would write in the
vacuum of space. NASA went to work. At a cost of $1.5 million, they
developed the "Astronaut Pen". Some of you may remember
it; it enjoyed minor success on the commercial market.
The Russians were faced with the same dilemma: they used a pencil.
The moral of the story? Don't overcomplicate your life.
Note: Creative Leisure News is published on the
first and third Mondays of each month. Your next issue will be
Monday, September 18th.
Need any rumors checked? Company news or comments on industry
issues? Call Mike Hartnett, in confidence, at 309-925-5593; fax
309-925-9068; or Email to firstname.lastname@example.org.