Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
October 16, 2000
Vol. IV, No. 20
TABLE OF CONTENTS
We are getting very close to switching Creative Leisure News
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SEPTEMBER SALES ARE ROCKY
Chains of all types suffered a disappointing September, according to
same-store sales figures. Judging from their explanations, they're
expecting a tough fourth quarter, too.
Once exception was Michaels, whose same-store sales rose 4%
and overall sales increased 15% to $200.4 million. The store count
is up to 616 Michaels stores, 110 Aaron Brothers stores, and 1
Wal-Mart's same-store sales rose 4.8% and Target's
rose 2.9%. Ames' same-store sales fell 3.9% and blamed a
higher amount of layaway sales compared to last year. Chair/CEO
Joseph Ettore said, "We are disappointed with our September
results." K-mart's same-store sales rose less than 1%,
which was "below plan" according to Chair/CEO Chuck
Conaway. J.C. Penney's same-store sales fell 4% and warned
that earnings would be less than Wall Street estimates.
Hancock's same-store sales rose only 1%, but CEO Larry Kirk
said, "Both price promotions and advertising expenditures in
September were less than the year-ago period."
Duckwall-Alco sales fell 2.3%, due to shifting its
anniversary sale from September to October, the company said. (Question:
How can you shift your anniversary sale from one month to another
and still call it an anniversary?) Officials did say its craft sales
were strong, however.
ShopKo same-store sales dropped (1.0%), too. ShopKo announced
it would not meet analysts' estimates for the 4th quarter and will
curtail expansion plans, including those for its Pamida
division. A few days later, Standard & Poor's revised its
outlook on ShopKo to negative from stable for its triple-B-minus
corporate credit, bank loan, and senior unsecured debt ratings.
RAG SHOPS HITS SALES RECORD
Total sales for the fiscal year were $100 million, up 5.7%.
Same-store sales rose 4.2%, thanks to an additional week in this
calendar year. Without that week, same-store sales rose 2.5%.
Officials are predicting that the year-end audit, to be completed
next month, will show the greatest profits in 6 years, thanks to
improved operating efficiencies, the additional one week, and
improved inventory shrinkage results. This is also the first time
since the company went public in June, 1991 that it was debt-free at
the end of the fiscal year. The store count in mid-October is 66.
President Michael Aaronson said, "We are moving into the new
fiscal year with great momentum and wonderful new opportunities. We
have plans to open new stores in N.J., N.Y., New York City, and
Conn. The first of which will open on October 15th in New
Development is under way for a new 20,000 sq. ft. prototype. The
company expects to open 3 prototype stores in the Fall of 2001 and
close three older stores in the new fiscal year.
COMPUTER SNAGS HURT JO-ANN STORES
Jo-Ann's announced its current
estimates for its third quarter results ending October 28 will be
half of its earlier expected earnings of $0.30/share. Officials
blamed lower than anticipated sales due to general economic
conditions and out-of-stock issues caused by the company's recent
Comparable store sales for the first nine weeks of the third quarter
were flat, compared with a 4.6% increase for the full third quarter
a year ago.
Chair/CEO Alan Rosskamm said, "Many of the systems-related,
out-of-stock issues we identified in August have been rectified,
with most of our seasonal and softlines businesses now in very good
shape at the store level. However, our crafts business was the last
product category to be addressed, and we still have another 30-45
days before we will be at the proper level of store inventory for
"The sales shortfall we have experienced to date in the third
quarter was larger than our original estimates," Rosskamm
added, "and we lowered our October sales estimates to account
for the categories still not fully in stock."
SALES RISE AT A.C. MOORE
A.C. Moore reported sales of $60.9 million for the third
quarter ended September 30, an increase of 21%. Same-store sales
increased by 4.5%. For the year, sales have risen 17% to $168.9
million and same-store sales have risen 5%.
President/CEO Jack Parker said, "We are pleased to have met our
sales projections for the third quarter and we remain on target to
meet consensus profit estimates. Our expansion plans have proceeded
on schedule and our new stores are performing very well."
During the quarter the company opened stores in Muncy and Langhorne,
Penn. and Hickory, N.C. The current store count is 48.
The earnings report will be released this Thursday. Investors can
listen to the conference call live over the Internet through Vcall
THIRD QUARTER STOCK REPORT
Wall Street's concern about consumer spending for the holidays is
apparent in the third-quarter (July-September) stock figures for
retailers, including some who sell craft and sewing supplies.
A.C. Moore was the big winner, increasing 23.5%. Hancock
Fabrics also performed well, jumping 17.6%, and Jo-Ann Stores
inched upward at 3.6%.
The rest were losers, particularly the discount stores. Ames
slid 26.2% and Wal-Mart was down 16.5%. Rag Shops
dropped 14.8% and Michaels slid 12.7%. By the end of
September, Ames was down 80% for the year while Wal-Mart has dropped
30% for 2000.
DUPEY CREDITORS FILE LAWSUIT
The creditors committee in the bankruptcy of the old MJDesigns
filed suit against Mike Dupey, regarding alleged transfer of assets
and extravagant expenses in the months prior to the bankruptcy
filing, the Dallas Morning News reported.
The chain, founded by Dupey in the late 1970's, had grown to 57
stores with total sales of about $250 million. It filed for
bankruptcy in February, 1999 listing almost $50 million in debts.
Since then eight stores have reopened under the same name but with
new ownership -- former employees and a Dallas investment company.
That operation is not affected by the lawsuit.
The suit charges that Dupey's spending habits in the 10 months prior
to, and after, the bankruptcy filing cost creditors and the company
about $2 million, the Morning News reported.
According to court documents and a Dupey lawyer, before this lawsuit
it appeared that non-secured creditors would receive about 8 cents
on the dollar. If this lawsuit is successful, it would raise the
recovery rate about a penny.
Dupey attorney Rob Yaquinto said the suit was drafted almost two
years ago, and a closer examination of the documents will show a
business reason for the expenses.
"We think almost every allegation is false and incorrect and
based on a very superficial effort by the creditors' committee to
put these allegations together," said another Dupey attorney,
Eldon Vaughan. "Most of these allegations are about how Mike
ran the company. He lives on the road at vendor shows and buying
trips in New York, Las Vegas, the Orient. That's his life. It wasn't
fraud or stealing or taking advantage of anyone."
The allegations include seemingly excessive travel expenses and
Dupey is to answer the allegations by this Thursday, then there will
be a round of discoveries by both sides. The case is set for trial
in January, but there's an excellent chance a settlement will be
reached, a Dupey lawyer told us.
SOCIETY OF CRAFT DESIGNERS' SEMINAR
The theme of the Society of Craft Designers' annual
Educational Seminar was Partners in the Creative Life.
Registered attendance was over 200. Membership in SCD is now close
to 600 with corporate members showing the largest increase.
The following is a review from Michelle Temares, one of the featured
speakers and attendees. Michelle also writes a column for the
quarterly art materials section in CNA.
"My impressions were very favorable. The Seminar was well
organized and ran very smoothly. SCD is a tremendously diverse
organization (designers from every craft arena: quilt, sewing,
decorative painting, scrapbooking, wearable art, general crafts,
etc), but the Seminar still managed to have events and seminars to
appeal to almost everyone.
"Attendance at educational seminars was up. My own sessions,
'Color Secrets' and 'In Search Of The Big Idea', were very well
attended, as were the other events I attended.
"SCD is doing a tremendous job training new designers in
business skills and professionalism. In the First Timers
seminar, members learned, among other things, how to put together a
portfolio, query an editor, write instructions, approach a book
editor, handle endorsement fees, etc.
"The designer showcases showed creativity and professionalism
and many corporate members said they were impressed with the quality
of the designs and presentations.
"Of equal importance is the networking that takes place at the
Seminar, both among the designers themselves and between the
designers and manufacturers, and publishers and editors.
"Very well attended was a late night series, 'Seminar
Connections', where corporate members and designers shared
information and asked questions. A very healthy, positive and
informative dialog was the highlight of these meetings.
"The only 'negative' I heard was that, with all the focus on
new designers, the needs of more advanced designers may not have
been completely met.
"Special kudos to Chris Wallace and Renee Sparks, the seminar
co-chairs, for putting together a diverse and high quality series of
AN ARGUMENT FOR CAREFUL EXPANSION
We received the following note from a very successful independent
retailer. He named names, but we're not interested in embarrassing
anyone. We are publishing this, however, because we have often
witnessed the same process the retailer describes here. In fact,
over the years we have seen almost as many companies die from too
much success as from failure. Here's his story:
"Category X has had a huge year again after being off last
year. Company A's products have carried the load and their new
intros are just getting bigger.
"Typical, however, is their marketing efforts. They cannot fill
the pipeline to the independents, and we have all had out-of-stocks
from them for months; but just recently they could not resist the
allure of the big boys' orders and started selling to [two large
chains] and now both chains are running ads at 25% off.
"This while they could sell their goods to independents at much
higher margins for themselves. Guess I would not feel bad if they
were filling our orders (the people who got them where they are
today), but they are shipping about 50% -- and declining because
they have tried to expand their market too quickly.
"All this usually ends up with the demise of the vendor because
now the independents are looking elsewhere to fill the gap, and the
chains will have them knocked off with goods directly from China by
early next year."
The moral of the story for small companies is not to avoid selling
to chains. Instead, it's this: 1. Don't expand until you're
confident you can cover your base solidly during the expansion. 2.
If/when you want to make the jump to selling to the chains, start
with one chain. 3. Don't get in the position where you're
short-changing your traditional customers to service new customers
who may not be as loyal. 4. Remember, every time you expand
your facilities, buy more machinery, and hire full-timers, you have
to sell that much more just to break even.
The maxim is, if you don't grow, you die. But if you grow too
MORE PREDICTIONS FOR FALL
1. "From a vendor's perspective, our orders for
fourth-quarter delivery are very good. We have a strong December
planned, due to excellent Spring orders [that are] shipping year
end. We expect good Christmas reorders during October and November,
even early December, as many consumers will delay purchases until
the last minute. September is up over last year, nearly 10%.
"With a strong U.S. dollar, and weaker Euro Dollar, I believe
our goods will be too expensive overseas. However, Canada looks good
as their economy has improved considerably." -- Large
2. "We have high hopes for fourth quarter. Scrapbooking
remains a strong (and growing) force. We're working hard to grow it
into international markets and our efforts have been met with only
enthusiastic response. The launch of our new 2001 line has the
potential to repeat the success of our scrapbooking papers. We're
looking ahead with anticipation -- we've got a lot to be excited
about!" -- Paulette Jarvey, President, Hot Off The Press
3. "The Northwest is entering a difficult economic
period. Boeing continues to reduce its workforce and has laid off
over 10,000 already this year. Dot.coms are having troubles and
we're feeling the fallout somewhat. Microsoft's anti-trust troubles
have dramatically affected us, as those new-found millionaires are
downsizing from their BMW 740's to the cheaper models. Ha!
"This suggests big troubles for most retail in our area, BUT I
am not so sure in the craft areas. We have not had a stellar summer
and sales have been flat for over 5 months now, but show some signs
of picking up.
"September was good with a small increase for the first time
since March. While much feels like doom and gloom, the craft
business seems to thrive in a flat or even down economy, so we have
the feeling that our Fall season might just surprise us and be up by
as much as 6-8%. "I feel like the industry as a whole is going
to have a good 4th quarter. Our Sierra Pacific Craft stores
are optimistic and with the exception of some small pockets, stores
are seeing pretty big increases in sales. They may not be typical,
as we all continue to delve deeper into alternative merchandising
while staying with the concept of components as our major business.
Traditional crafts are generally not robust, but again, pockets are
"Beads have had a huge year again. Floral accessories, candles,
tabletop water fountain components, fall seasonal floral,
scrapbooking, rubber stamping, quilting fabrics, accessories, and
even good quality yarn are the hot lines for us right now." --
Independent retailer in the Northwest, and an Sierra Pacific Craft
4. "Our two stores have had slow but steady growth
throughout the year, from flat at the start of the year to each
store increasing 6% for September. Year-to-date (through Oct. 1)
growth for both stores is 4%. The last couple weeks have shown good
"Regarding the 4th quarter, I expect my sales to be up about
7-8% from last year. We in Sierra Pacific Crafts are also
doing a special quality 'catalog' with presentation of quality home
dec and craft products. This may increase sales to possibly
10%." -- Sierra Pacific member.
5. "Consumer debt, business debt, and fuel for travel,
transportation, and heat are at all-time highs. It's an election
year. Unemployment is virtually nonexistent. The market looks like
it's, at best, uncertain and, at worst, in decline.
"Back to school, in our industry, was weak. The shelves are
full of imports, mostly finished items in floral and seasonal. The
number of women using computers is growing rapidly. Theaters are
closing. Restaurants are opening. The new housing market is booming.
"Sounds kind of like a country western song to this point.
"However, consumers don't seem to give a damn, and will keep
spending until they run out of money and debt. I don't think they
will run out of either this Fall. People are going to party and
partying is good for our business. People are going to give and
giving is good for our business. People are trying to make things
meaningful and personal. That's good for business.
"All in all, I think we will have a pretty good Fall, and
Christmas will be merry after all. Now, that is a song I'd
like to sing.
"I am somewhat concerned about the preparedness of suppliers to
compensate for the [retailers'] low inventory levels of continuity
merchandise. Someone must commit to a reserve to supply a surge in
consumption of essentials if POS systems are going to demand a
"just in time" strategy of inventory control.
"There is also the possibility that there could develop
liquidity situations caused by slow payment to continuity suppliers.
There is always that risk.
"So everybody better watch their receivables whether you are a
manufacturer, a converter, a distributor, a service supplier or an
independent manufacturers' representative." -- Manufacturers'
ETHICS & CHALLENGES IN THE
Thoughts from Jim Hedgepath of Pegasus Originals, on the
ongoing battle against copyright piracy on the Internet and the
challenges of the new digital world:
"Too many people seem resigned to a future in which criminal
behavior will be tolerated by rewriting the laws to accommodate it,
rather than prosecuting it. It is going to be very difficult to move
from a printed to a digital world if people place no value on
digital information or the creator of that information. We have
already seen the damage done by having copyrighted patterns in
"We are looking at every option that comes across my desk. The
21st century has arrived COD -- Change or Die! There are many
challenges that face us and there are many positive things in the
changes that will come. Some people will just see problems and
others will see opportunities. This is a time of not only great
opportunities, but careful thinking about everything we do and how
it affects the industry. This is a time when we could easily shoot
off our foot."
Note: Jim has been interviewed by numerous members of the
national media. The Time article is available at http://www.time.com/time/magazine/articles/0,3266,55700,00.html.
ADS. Hancock Fabrics ran a full-page ad in the
November issue of O, Oprah Winfrey's magazine.
CLOSING. Cindy Wiggins, of Syndees Crafts, announced
the company will close some time after December 1st. Ms. Wiggins
will retire "to the good life," she says. Sons Chris and
Jeff will seek business ventures outside the industry. Orders were
still being accepted at the time of this writing. Anyone interested
in purchasing rights to the name should contact Jeff Wiggins at
702-457-1985 or Chris Wiggins at 702-564-8118.
LAWSUIT. A discrimination complaint against Wal-Mart
for barring a female employee from playing Santa Claus was thrown
out by a Kentucky state panel that said the woman wasn't convincing,
the Associated Press reported. Managers at the Morganfield, store
switched to a male Santa after a customer said her child asked about
Santa's breasts. The female employee, who quit her job, was seeking
$67,000 in lost wages and pain and suffering.
STORES. Pamida, a division of Shopko, opened 56 stores
in early October in rural communities in the South and Midwest. The
store count is 390, with 4 more to open this month.
AWARD. CPE was named the 2000 South Carolina
Manufacturer of the Year by the S.C. Chamber of Commerce. CPE is
a felt manufacturer whose industry-related products are marketed
under the brands EAZY FELT (stiffened felt); QUICK STICK
(peel 'n stick adhesive-backed felt), and a new educational line, FIRST
TV. Aleene and her daughters are working on the pilot for a
new craft tv series.
RANDOM QUOTES, RANDOM THOUGHTS
1. Question: I was checking a website for a CNA
article and came across a how-to posted by a consumer on the site's
bulletin board. The instructions told crafters to fill a large
pickle jar with potpourri and Christmas lights, then plug in the
lights. Someone responded, saying that could start a fire. I don't
know if it would or not, but it got me wondering: If someone is
injured in some way because of a project or advice posted by a
consumer on your craft site, are you liable?
2. Attention manufacturers: looking for fresh new designs for
project sheets, madeups for your booth, perhaps even new uses for
your products? That's why so many manufacturers are members of the Society
of Craft Designers. The members are immensely talented, and many
are freelancers who would love to do work for you. Email firstname.lastname@example.org
for more info.
INTERNET & E-COMMERCE UPDATE
TIME OUT. On October 2nd Wal-Mart posted a message on
its web site saying it was closed for remodeling. It's expected to
be closed for a few weeks.
TV. QVC had another apparently successful craft day
October 10th. To see the numerous kits and items QVC sells on its
website, go to www.qvc.com, click
on Arts & Leisure, and click on Crafts and other
appropriate sections. Sign up for the site's craft newsletter, too.
STRATEGY. The Los Angeles Times published an article
by Karen Klein, owner of a successful Beverly Hills florist shop, Floral
and Hardy, and a successful e-commerce site, Florist.com.
The keys to her online success, Klein says, are keeping costs low,
customer service and, "my biggest lesson is that an online
business has to be run by people who know something about the
industry, whatever it is." Klein expects Florist.com to receive
45,000 online transactions totaling $5 million this year.
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;
or check www.creativenetworkinc.com.
CENTRAL: Product Mgr. (floral, wedding).
MID ATLANTIC: VP Account Executive (soft goods/crafts) ... VP
Marketing (soft goods/crafts).
NEW ENGLAND: Asst. Art Director (art background) ... Dir. of
Sales & Marketing (novelty/impulse items).
NORTH CENTRAL: Dir. of 3D Product Development/Design
(gifts/collectibles) ... Jr. Designer w/ licensing
(gifts/collectibles) ... Sr. Designer w/ licensing
(gifts/collectibles) ... Designer/Product Developers
(gifts/collectibles) ... VP Product Development/Design
PACIFIC: Dir. of Product Development (gifts/collectibles) ...
National Account Mgr. (gifts/specialty accts) ... Production Mgr.
(overseas experience) ... Dir.of Product Management (overseas exp)
... Product Mgr. (craft experience).
SOUTH CENTRAL: VP Customer & Employee Product Education
(craft experience) ... Marketing Communications Manager (retail
SOUTHERN MIDWEST: Design Dept. Mgr. (crafts) ... Marketing
CREATIVE NETWORK: JOBS OF THE
Position: National Account Manager - Gift & Specialty
Accounts ... Compensation: $65-75K + 20% bonus ... Location:
Southern California ... Description: Open new markets in gift
channels, while expanding business with the existing account base;
work with reps selling the key accounts; travel; P&L
responsibilities ... Qualifications: 5-7 years experience
with gift and specialty accounts, chains, and department stores;
management experience; and analytical abilities.
Position: Product Development/Designer with Licensing ... Salary:
$45-75K, + profit sharing ... Location: Chicago area ...
Description: Identify, develop, and evaluate ideas and themes for
new lines; manage the development process ... Qualifications:
3-5 years product development experience, preferably in
collectibles; some hands-on experience is required as are experience
working with licensors and effective communication and interpersonal
For more about these positions, contact The Creative Network
THE CLN RETAIL INDEX
A. C. Moore (ACMR). Last*: 7 3/4 ... Change**: -1/8
Ames (AMES). Last*: 3 7/8 ... Change**: -1 27/32
Hancock Fabrics (HKF). Last*: 4.5 ... Change**: -1/2
Jo-Ann Stores (JAS.A) [a]. Last*: 7 1/16 ... Change**: -3/16
Michaels (MIKE). Last*: 35 15/16 ... Change**: -4 1/16
Rag Shops (RAGS). Last*: 2 7/32 ... Change**: +1/16
Wal-Mart (WMT). Last*: 45 ... Change**: -3 1/8
CLN Retail Index. Last*: 106.344 ... Change**: -8.4%
Dow Jones Index. Last*: 10,192.18 ... Change**: -4.3%
*Oct. 13 ** from Sept. 29 [a]
voting share Note: Prices are exclusive of dividends
SO YOU THOUGHT YOU WERE
"Take heart, anyone among you who believes you are
technologically challenged," writes Tom Ware of Bagworks,
and sends along this excerpt from a Wall Street Journal
1. Compaq is considering changing the command, "Press
Any Key" to "Press Return Key" because of the calls
asking where the "Any" key is.
2. A caller complained to AST technical support that her
mouse was hard to control with the dust cover on. The cover was the
plastic bag the mouse was packaged in.
3. A Dell technician advised his customer to put his floppy
back in the drive and close the door. He then heard the customer put
down the phone, cross the room, and close the door.
4. A Dell customer was angry because his computer said he was
"bad and an invalid." The technician said the computer
didn't mean him personally.
5. An IBM user complained his computer said it "couldn't
find the printer." The user had turned the monitor to face the
printer, but the computer still couldn't "see" the
6. A caller said her new Dell computer didn't work, even
though she "pushed and pushed on this foot pedal." The
"foot pedal" was the computer's mouse.
7. A woman called Canon with a problem with her printer. When
asked if she was running it under "Windows," she said
"No, my desk is next to the door. But that is a good point. The
man sitting in the cubicle next to me is under a window and his
printer is working fine."
Note: Creative Leisure News is published on the
first and third Mondays of each month. Because there are five
Mondays in October, your next issue will be Monday, November 6th.
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 email@example.com.