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Creative Leisure News
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Email: mike@clnonline.com



Date: November 6, 2000
Vol. IV, No. 21

Printer Version




This week email subscribers will receive an email from us, saying the online version is operational. Our note will contain a link; click on it and it will take you to the site, where you can receive your username and password.
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Michaels reported a 3% increase in same-store sales for November, making officials more optimistic than they were two weeks ago.

CEO Michael Rouleau said, "Given that our sales came in slightly better than anticipated in our mid-October press release, coupled with less diluted shares, it now appears we will make the original 3rd-quarter consensus earnings of $0.43. With that level of earnings and no change in our outlook for the fourth quarter, we expect earnings/share to increase $0.09 to $1.61 for the 4th quarter and $0.07 to $2.47 for the full year, based on the effect of less dilutive shares."

That October 18th press release caused the stock to fall 43%, to below $20, in one day. From that day until just prior to the November sales announcement, the stock had climbed back to $26.13/share. After the November announcement, the stock closed at $29.38.

The company plans to release third quarter earnings on November 21st.

Other November same-store sales figures: Wal-Mart, +4.5% ... Target, +4.1% ... ShopKo, -0.6% ... Kmart, -1.2% ... Ames, -2.7%. Duckwall-ALCO rose 2.4%, due to moving an annual sale from September to October and strong sales in certain categories, including fabrics. New SEC accounting rules governing layaways (sales aren't counted until the items are paid for and picked up) may lower October results but boost November-December figures.
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Michael Rouleau, CEO of Michaels, announced the new consumer craft magazine, Michaels, will debut in February. Krause Publications, publisher of CNA, Arts & Crafts, Great American Crafts, and more than 45 other magazines, will publish the magazine.

The bi-monthly magazine will begin with a 200, 000 distribution base and will be sold in Michaels stores -- and on newsstands across the country and by subscription. Well-known industry journalist Julie Stephani is the editor. The content "will showcase designs with how-to's that promise creative expression and involvement," a Krause spokesperson said.

"This is an exciting opportunity for Krause Publications and Michaels Stores to reach out to current and new audiences," said Krause's President, Roger Case. "Through content and design, the new magazine will invite those occasional and seasonal crafters to make it a year-round personal or family activity, while inspiring veteran crafters to explore new possibilities."

The magazine is accepting advertising, which will be sold by Krause personnel. For information, call Deb Knauer, head of Krause's craft division, at 715-445-2214.
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Offinger Management announced a new consumer show, Be Creative! Expo, to be held August 18-19 in Columbus, Ohio. The show promises to have dozens of workshops, activities, and 200+ exhibits and displays in all craft, sewing, painting, and needlework categories. Offinger will partner manufacturers with retailers who will sell products on the show floor. The Expo should be an excellent opportunity to educate consumers and test market new products and techniques.

For exhibit or attendee info, call Tricia Kidd at 800-943-2777, ext. 3118; email BeCreativeExpo@offinger.com, or surf to BeCreativeExpo.com
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Public retailers are adapting Internet technologies to communicate more often with stockholders, Wall Street analysts, and the public. A.C. Moore has been using the Internet that way for months, and now others are joining in.

Jo-Ann's releases its third quarter earnings, then top execs will discuss them over the Internet on November 10th at 10 am EST. President/CEO Alan Rosskamm and Executive VP/CFO Brian Carney will participate. Log onto www.joann.com or www.streetevents.com.

Michaels began webcasting and archiving company conference calls, and will now host calls to announce its monthly sales data. Calls had been held only in conjunction with its quarterly report. The first monthly sales conference call was held last Thursday. To participate in future calls, call 800-865-4460. To listen over the Internet, go to http://www.vcall.com at least 15 minutes early to register, download, and install any necessary audio software. The call will also be archived; last week's call will be available until November 9th.

Ames will conduct a conference call to discuss third quarter results at 10:30 am EST November 9th; it's available, live, at www.amesstores.com.

ShopKo will now provide weekly comparable store sales updates. The recording of the previous week's results (except on the Monday preceding monthly sales releases) is available after 10 am CDT on the following Monday by calling 920-429-7039.

Hancock's conference call reporting third quarter results will be live on the Internet on November 15 at 9 am CST. Log on to www.hancockfabrics.com, click on "Corporate Information", then "Conference Call". A replay will be available on the web site and via telephone through November 22 by dialing 800-615-3210 and using passcode 4628233. To listen to the Internet call, you need RealPlayer, downloaded free from www.real.com/player/index.html.
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Jo-Ann Stores announced that Executive VP/Merchandising Jane Aggers has left the company to pursue other interests. "We thank Jane for her contribution to our growth and wish her well in her future endeavors," said Chair/CEO Alan Rosskamm. Aggers had reportedly been with Jo-Ann's for 24 years.

Jo-Ann's hired Heidrick & Struggles, a New York recruitment firm, to conduct a search for a replacement to "lead the rollout of its Jo-Ann etc big-box' concept and to improve supply chain efficiency by leveraging the company's significant investments in systems and logistics."

Rosskamm stated, "... I am very confident in the abilities of our two general merchandise managers. Until a new senior executive is named, they will report directly to me."
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Operating profit for the quarter ended September 30th jumped 190% to $578,000 before pre-opening expenses. The pre-opening costs related to three new stores opened during the quarter were $576,000, or an after-tax impact of $0.05/share compared with $.02 per share in 1999. Net loss for the quarter was $91,000 or $0.01/fully-diluted share, compared to a net loss of $79,000 or $0.01/share a year ago.

EBITDA (earnings before interest, taxes, depreciation and amortization.) was $951,000, up 51%. As we reported, sales grew 21% to a record $60.9 million. Same-store sales rose 4.5%.

President/CEO Jack Parker said, "We continue to be pleased with the operating results of our company. Due to our team's efforts, in addition to improving our operating results, we have maintained a strong balance sheet, funded nine new store openings, and grown EBITDA during this process by 20%.

"Our merchandising plans are in place for the fourth quarter," Parker added, "and our stores are in position to execute those plans so that we are optimistic that we will achieve the consensus estimate of $.90 for the fourth quarter."
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We've detailed the problem of consumers scanning copyrighted projects and posting them on the web for the world to download, thus depriving retailers, publishers, and designers of income.

The problem appeared to be primarily in the soft craft categories, but here's an example that's pure crafts: http://www.angelfire.com/tx4/crafts2001/index.html.

"Hi everyone! Here you will find some crafts that I have scanned for your PERSONAL use ONLY! Please do not share this link with anyone. I have scanned each of these to share with the wonderful ladies on the craft lists I am a member of ONLY. These can not be mass produced in any form. The following are all from the book The Best of Aleene's Creative Living' By Aleene and Aleene's Craft Quickies' By Aleene that I have purchased. So sit back and browse through the crafts and click on any links that you are interested in seeing and printing out...."

What follows are links to 35 projects.

Comment: This consumer isn't intentionally violating copyright rules; she's merely sharing projects she loves. But her friends, and their friends, no longer need to buy Aleene's books.

"The thing I found interesting about this one is that she thinks that it is OK if it is non-commercial and that it shows they are moving into craft books," said Jim Hedgepath of Pegasus Originals. "Plastic canvas books have been hit really hard, and I think craft books will be hit worse than cross stitch chart books, because they are easier to scan and reproduce."

"We caught someone last week who was designing and selling their own Coca-Cola Santas on E-bay," Jim added. "Coke has an arrangement with E-bay to shut down those licensing infringements quickly."
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Another e-commerce strategy appears to have failed.CraftClick.com announced the resignation of Russell Murray as chair, and his withdrawal of the two-year financing and operating commitment he made to the company in September.

Earlier this year, the company's annual report revealed major financial problems; then in September the company's chair, Peter Yolin, resigned. Murray, the head of Art2Art.com, one of the sites previously purchased by CraftClick, assumed the leadership role. Murray is the son of Tom Murray, former owner of the now defunct distributorship, Ozark Arts & Crafts.

The board now consists of President/COO Sandy Seth and CFO Manny Singh. Seth stated, "Murray's withdrawal of his two year financing commitment to CraftClick.com unfortunately puts us in a very precarious situation. Our immediate funding needs are no longer being met. Additionally, we are currently unable to fulfill customer orders, as we do not have the working capital required to operate the business.

"We are working diligently with our creditors to keep the company in existence," Seth added, "through the sale of company assets, including various of our online arts & crafts sites, or through the merger with, or acquisition by, another entity. We are currently in discussions with certain parties to this end, and intend to keep our shareholders apprised of all material information as it becomes available."

Rather than building a business and then going public, CraftClick.com went public (traded on the NASDAQ BB under CTCK), then bought existing specialty sites (portals and e-commerce) that already had established visitors and sales. Needlework, art materials, crafts, and stenciling sites, including one in England, were purchased.
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1. As part of our efforts to move onto the web, I've checked old issues looking for items that are still relevant. I came across a note from Chris Crombie of Hobbycraft, the largest craft retail operation in Great Britain. Chris had warned U.S. manufacturers that if they didn't adhere to the new British packaging and labeling laws, he wouldn't be able to stock their products.

I wrote to Chris asking if that was still a problem. He answered an emphatic yes! "I've just come back from the U.S. and it was a big problem when selecting products." To re-read Chris' original note, go to clnonline.com and click on "Industry Forum"; it's in Section Two under the headline, "U.S. Crafts Illegal in Europe?".

2. Do you hate automated telephone answering systems? A few subscribers sent us by far the best/funniest system out there. To hear for yourself, call National Discount Brokers at 800-888-3999 (it's free). Listen to all of the options. When you hear #7, hit 7. Trust me, it's worth a few seconds of your time.

3. The latest from the strange world of "new economy" finances. Amazon.com lost another $241 million in the last quarter, compared to $197 million a year ago. That's despite a 79% sales increase to $638 million. Amazon.com CEO Jeff Bezos described the quarter as "strong," because the losses were less than Wall Street predictions.

4. Want to read a thought-provoking article on why you should consider raising prices? Go to http://www.incsight.com/resources/articles/pricing.htm.

5. The Sierra Pacific Crafts group continues to amaze me. This consortium of independent retailers has produced Creativity, a "Home Idea Book" that was mailed, with the individual store's logo, to each store's mailing list. It's 48 color pages on glossy stock and filled with excellent photographs of gorgeous finished craft projects in lovely room settings. It includes the prices for the products, but it's not a mail order catalog. It's designed to drive traffic into the stores. It's without question the most impressive piece of retail ad material I have ever seen.

Oh, and if people tell you crafts are tacky, show them Creativity.
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BANKRUPTCY. We've learned the banks have foreclosed on Artis, shut the doors, and will sell the assets to a well known industry company. The deal may be completed this week.

PROMOS. Lion Brand Yarn and Wal-Mart have created something remarkable: Enter a Wal-Mart between now and November 24th and the traditional Wal-Mart greeter will be wearing a scarf crocheted from one skein of Lion's Homespun yarn. Attached to the scarf is a large button saying, "Ask Me About My Scarf." A yarn display (with a free leaflet containing knit and crochet patterns) will be at the front of the store next to the greeter; the leaflet will be offered in the yarn department; and Lion's spokesperson, Vanna White, will be heard hourly on Wal-Mart radio promoting the yarn. (Comment: Now that is cooperation between a retailer and a vendor.)

SURVEYS. A survey by America's Research Group revealed 37.3% of 1,000 consumers are spending less on themselves and their families -- the first time in more than a decade of surveys that shoppers are cutting back. Main reason for the cutback? Rising gas prices ... Yet according to the 15th annual Consumer and Retailer Mood Survey, released by the National Retail Federation and conducted by Deloitte & Touche, 82% of consumers say they expect to spend more or the same as last year -- the highest percentage since the survey began asking the question in 1993. Deloitte & Touche and the NRF expect holiday sales to increase 5.5% and 6.5% in November and December.

PLANS. A September survey of crafters at HIA's consumer website revealed 74% of respondents plan to craft more than last year and 61% will spend more than 36 hours crafting.

TEST. Wal-Mart is expanding its test of major appliances from 12 to 100 stores. Some stores have the departments near the front door, but look for them to eventually be in the back of the store, reports DSN Retailing Today. Still no word on which departments would lose space if the test is successful and the program is rolled out into all stores.

LOOKING TO BUY. Industry company looking to buy a floral or floral-related company with annual sales in excess of $10 million. For more info in complete confidence, call or email Mike Hartnett at mike@clnonline.com or 309-925-5593.

RUMOR. Both sides tell us there is no truth to the rumor that Promotions Unlimited and Goliath Falls are buying Herr's.

VIDEO. Bill Neu is coordinating new Perfect Palette videos for David Larson Productions. Interested artists and vendors should contact Bill at Bneu@neucom.org or call 520-522-0388.

TV. Series 200 of Sew Young, Sew Fun uplinks to PBS stations next month. Call your local PBS station and ask for it. It's sponsored by Viking, Coats and Clark, Primedia, Cranston, Jo-ann's, Dritz/Omnigrid, The Snap Source, Offray, and Butterick.

ROLODEX. Midwest Design Imports has moved to 13303 "F" St., Omaha, NE 68137. Call 402-691-8009; fax 402-691-8017 ... Satellite Press (Memory Makers magazine): 12365 Huron St., Ste. 500, Denver, CO 80234-3438. 303-452-1968 or 800-366-6465.

EXPORTS. Plaid named EC Birch Pty Ltd. as its full-line distributor in Australia.

DIRECTORS. Elected to The National Needlework Association's board of directors: Janet Fenton, JB Designs/Erico Designs; Brent Schulle, K's Creations; Frances Smetana, The French Knot; and Elaine Warner, Needle Necessities.

REPORTS. For the 3rd quarter ending September 30, sales at Martha Stewart Living Omnimedia rose 12.1% to $61.9 million. Net income rose 10% to $3.8 million ... The Leather Factory reported net income of $315,099 ($0.03/share), up 15%, for the third quarter. Sales declined 3% to $7,374,556, but better gross margins and lower interest costs improved profits.

STENCILS. Stencil Ease will manufacture and sell Home Decor Stencils from designers Jeanie Serpa, The Periwinkle Collection, and Donna Bernardo. The collections combined will offer 100+ laser-cut stencil designs in diverse styles and will be launched at the HIA show.

PEOPLE. Lynda Musante is the Marketing & Development Manager, Reynolds Metals' new Arts & Crafts division. Watch for Reynolds to launch a major product line in January ... AMACO hired Marilyn Schwankoff as Sales VP for its Genesis Artist Colors division ... One of the industry's best, Casey Casebolt, was promoted to VP/Divisional Sales Manager for the Gerson International (seasonal import) division of Gerson.

TRADE SHOWS. Booth reservations for the 2001 ACCI show (July 20-23) will be made December 1st, so for a prime location, reserve your space now. Call 888-360-2224 or visit www.accicrafts.org ... The Int. Craft and Hobby Fair, including Stitches, will be February 18-20, in Birmingham, England. Call 01425-272711; email info@ichf.co.uk; or log onto www.ichf.co.uk.

FINANCING. Zany Brainy completed the final $50-million portion of its 3-year, $115-million secured revolving credit facility with First Union Bank.

DESIGNERS. The Society of Craft Designers annual educational seminar will be September 5-8 in Phoenix. For more information, and info on SCD's Certified Craft Designer program, call 740-452-4541, email scd@offinger.com, or surf to www.craftdesigners.org.

SHOWS. Next year's dates for the Canadian Craft & Hobby Association: April 2-3 in Halifax, Nova Scotia; June 8-10 in Edmonton, Alberta; and September 7-8 in Ottawa, Ontario. Call 403-291-0559 or email ccha@cadvision.com ... Registration kits will be sent later this month for The National Needlework Assn. show in Long Beach January 20-22. Other 2001 TNNA show dates are April 1-2 in Philadelphia and June 9-11 in Columbus, Ohio. Call 800-889-8662; email tnna.info@offinger.com; or surf to www.tnna.org ... The Society of Decorative Painters show will be May 14-20 in Reno. Call 316-269-9300, email sdp@southwind.net or check www.decorativepainters.com.
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SITES. Plaid will unveil its redesigned site, plaidonline.com, this month ... Wal-Mart and Ames re-launched their sites, but neither offers products from our industry.

SALE. Joann.com is offering 30% off everything on the site, including new additions in the fabric department for orders by November 12th.

COPYRIGHT. Craftopia.com has an excellent explanation of the copyright laws for its customers. It's available at http://www.craftopia.com/shop/redirect.asp?emr=co5a5.

ART. Studio Source, a division of Artisan Network, now offers posters and prints to its Studio Source partners.
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The following email came from Kathy Wirth, a leading designer in plastic canvas:

As a plastic canvas needlepoint designer, I feel much like Rodney Dangerfield: "I don't get no respect!" It's not that I personally, as a designer, am not respected, but my craft is often looked upon as tacky and cheap. If this were true, I would not be spending so much time designing it!

There are so many wonderful, even upscale, projects today using plastic canvas that it boggles the mind. The possibilities are endless. Unfortunately, there is this "tacky" image out there that needs to be overcome.

There are definite shortcomings in the PC departments in many chain stores. They're often crammed into the farthest corner and there's often a lack of organization and cohesiveness. For example, the store's rack may include pattern books featuring designs worked on 10-count canvas, but no 10-count canvas is available.

A group of leading PC designers recently banded together to combat the image problem and support and promote the "new art" of PC needlepoint. Many of us have heard from consumers that they have problems finding supplies. Here's one story that came up in our conversation:

"A few months ago I went to my local craft chain store and checked the PC department. They had a display board with several magnets that had been stitched from one of a large publisher's books of licensed characters -- but they were displayed with the wrong side showing! They were well stitched and didn't have magnets glued to them, so the wrong side was neat -- but it was definitely the wrong side. I told the needlework manager they were displaying the models with the wrong side showing. She was very nice and thanked me, but months later the display hasn't been changed. I guess she was just humoring me. In short, it is very easy to see why consumers are frustrated when they shop for plastic canvas supplies."
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The following is from Karen Ancona, the editor of CNA magazine:

I wanted to share with you my encounter with a winner of the drawing for the CNA survey.

When I saw a ceramics store in Florida was one of the winners, I thought, "Probably does $50 annually." Then I reached the owner, Frances Wydra, who answered the phone with a weak "hullow" and was breathless and confused.

I learned she is just recovering from cancer surgery. When I told her she had won, she howled with joy and perked right up and, as is typical of these mom-and-pop stores, started to tell me her life history:

Does she make gobs of money? No. In fact the store has suffered through her illness. She only has 5 students a week now (ceramics stores teach and sell), but she sells lots of stuff (when she's well, she said, sales are better).

Then she told me she will use the books [the prize for the drawing] to find more projects for her blind and handicapped students!

Blind crafters? Well yes, she said, she teaches 31 blind people and one class of other types of handicapped people -- for free. One handicapped woman has only two fingers, "But she's quite a good painter," said Frances.

Frances teaches the blind texture painting, but they have requested macrame and she knows we will have books to help her teach them macrame and other crafts. She hoped this prize would be the beginning of good things to come for her, though she said she has plenty of "good vibes and prayers coming from her students."

It's people like her who put American business into the kindest perspective. When someone suggests the weakest retailers do not do justice to this hot-shot industry, let us all remember that some of these little guys could teach us lessons about life that go way beyond fiscal profits. It's a real perk in this job to talk to them.
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The only personnel recruitment firm specializing in our industry has the following job openings. Call 360-834-0802; fax 360-834-0702; email jessica@creativenetworkinc.com; or check www.creativenetworkinc.com.

CENTRAL: Layout Artist (catalogs, books) ... Catalog Copy Writer ... Dir. of Sculptural Team (3D consumer products) ... General Manager - (educational manufacturer) ... Product Development/Designers & Licensing (gifts/collectibles) ... Product Development/Designers (gifts/accessories).

MID ATLANTIC: Key Account Mgr. (crafts/hobbies).

MID/SOUTH CENTRAL: Design Dept. Mgr. (crafts) ... Marketing Mgr. (crafts).

NEW ENGLAND: Asst. Art Mgr. (fine prints/posters) ... Director of Sales & Marketing (novelties/toys).

PACIFIC: Asst. Brand Mgr. (hobbies/crafts) ... Brand Mgr. (hobbies/crafts) ... Print Production Mgr. (overseas experience) ... Brand Mgr. (scrapbooking experience).

SOUTH CENTRAL: Marketing Communications/PR (retail chain) ... VP Customer and Employee Education (retail chain).

SOUTH EAST: VP Product Development (gifts/accessories).


Position: Assistant Brand Manager ... Location: California ... Description: Assist in the creation of innovative marketing plans ... Qualifications: Understanding of trends and consumer thinking (a definite plus if it's within the home decor and lifestyle product categories). Strong interpersonal skills are needed.

Position: General Manager ... Location: St. Louis area ... Salary: $90-100K ... Company: Subsidiary of a leader in pre-school educational products; plans to diversify by selling to parent/teacher stores and promoting to teachers ... Description: maintain and improve the budget and P&L; maximize revenue and operating results with creative sales and marketing strategies; work with product development team to create lines that meet local needs; work with the operations manager to reduce costs and improve logistics; implement company, legal, and financial internal procedures ... Qualifications: 10-15 years of sales and marketing experience; MBA preferred; knowledge of educational products; experience working with European owned company; skills to manage experienced accountant and operations manager.

For more about these positions, contact The Creative Network at 360-834-0802.
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A. C. Moore (ACMR). Last*: 6 5/8 ... Change**: -1 1/8
Ames (AMES). Last*: 4 23/32 ... Change**: +27/32
Hancock Fabrics (HKF). Last*: 4 5/8 ... Change**: +1/8
Jo-Ann Stores (JAS.A) [a]. Last*: 6 13/16 ... Change**: -5/8
Michaels (MIKE). Last*: 29 1/8 ... Change**: -6 13/16
Rag Shops (RAGS). Last*: 2 ... Change**: -7/32
Wal-Mart (WMT). Last*: 47 3/8 ... Change**: +2 3/8
CLN Retail Index. Last*: 100.906 ... Change**: -5.1%
Dow Jones Index. Last*: 10,817.95 ... Change**: +6.1%

*Nov. 3 ** from Oct.13 [a] voting share Note: Prices are exclusive of dividends
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That problem you're complaining about? With a product, employee, boss, or whatever? Put it aside for a moment and consider this:

The other day I was talking to a woman who teaches in a very tough, poor neighborhood. She said one of her third-grade girls missed school, then came to her the next day and said, "I'm sorry I wasn't here yesterday. Mommy was sick, so I had to sell the drugs."

Ok, we can now resume griping about how tough our lives are.
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Note: Creative Leisure News is published on the first and third Mondays of each month. Your next issue will be Monday, November 20th.

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; email to mike@clnonline.com.


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