Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
November 20, 2000
Vol. IV, No. 22
TABLE OF CONTENTS
Note the "Calendar" section in the left-hand column. It
has a listing of all of the major trade shows and events, complete
with phone numbers and links to the sponsoring organizations that
have web sites.
Also, at the top, just under the volumne number, it says
"printer-friendly version". If you want a hard copy of
this issue, click on that. You can print this version, but if you
do, it will be very long and will include lots of blank space
(because it prints room for that left hand column).
Finally, a word about your username and password. Feel free to give
it out to your colleagues in your physical office. Giving it out to
anyone else is a violation of my copyright. If everyone gives their
username and password to their friends, and they give it to their
friends, I'm out of business.
If friends are curious about the Creative Leisure News, tell
them to come to the site and look around for themselves. Everything
is free except the current issue. If they like what they see, they
can sign up for two free issues.,
Once a company is a paid subscriber, out-of-office employees can
subscribe for only $35. Considering how much money the industry
loses to copyright violations by consumers, the least we can do is
respect other people's copyrights.
HANCOCK: MORE SALES, LESS INVENTORY
Sales for the third quarter ended October 29 rose only 1% to $99.9
million and same-store sales rose only 1.2%, but net earnings rose
24% to $3.1 million, or $.19/diluted share. For the first nine
months of the fiscal year, earnings have more than doubled to $5.8
CEO Larry Kirk said, "Sales and gross margins were higher while
expenses, inventories, and bank debt were lower.
"We have closed 200 small low-potential stores," Kirk
added, "assimilated two key acquisitions, remodeled over 75% of
our stores, completed interior and exterior signage conversions, and
made significant enhancements to our merchandise mix. As a result,
asset productivity is increasing. The company is now doing more
sales in fewer stores with considerably less inventory investment.
"Unit growth is a priority for the company," Kirk added.
"We have the capacity to support considerably more stores with
only minimal increases in G&A and distribution costs.
"At the same time, we are aggressively expanding our
store-within-a-store concept for home decorating in an alliance with
Waverly, the premier brand in decorative fabrics. Currently,
the concept is installed in 22 stores, and customer response has
been very positive. In addition, the home accents product line that
was added in mid-1999 is proving to be a very good complement to our
home decorating strategy and will be developed further." Kirk
also expects enhancements in the quilting and special occasion
categories next year.
During the quarter Hancock opened two stores and closed three. The
store count is 447.
JO-ANN'S MEETS (LOWER) EXPECTATIONS
Net income for the third quarter ended October 28 was $3.0 million
($0.16/diluted share), in line with the lowered expectations the
company had communicated last month. The results include an equity
loss of $1.1 million ($0.06/diluted share) related to Jo-Ann's
minority investment in IdeaForest.com. Last year's third quarter net
income was $8.3 million or $0.45 per diluted share.
Net sales for the quarter rose 4.4% to $362.5 million, but
same-store sales dipped 0.4%. The quarterly operating profit was
$14.4, down from $20.9 a year ago.
Chair/CEO Alan Rosskamm said, "As a result of our
infrastructure investments and Internet joint venture, we had
originally planned the earnings for the quarter to be less than the
prior year. Due to several adverse factors, including out-of-stock
issues caused by our SAP systems conversion and an apparent softness
in the general retail environment, our actual results of $0.16/share
for the quarter came in below our original plan, but in line with
the revised guidelines we issued in early October."
During the first three quarters of the fiscal year, Jo-Ann's opened
13 superstores and two traditional stores, relocated five
traditional stores, and closed 19 smaller or underperforming
traditional stores. For the fourth quarter, the company expects to
open three superstores and relocate one traditional store. The
current store count is 967 traditional stores and 55 Jo-Ann etc
AMES TO CLOSE STORES, REVISES
Ames' stock plummeted 40% shortly after the company announced
disappointing third-quarter results, store closings, and lower
estimates for the fourth quarter and fiscal year. For the year the
stock has fallen xx.x%.
Ames will close 32 of its 479 stores, 31 of which were former Hills
Stores acquired in December, 1998. An Ames spokesperson said only
minimal capital improvements had been made at a number of these
locations. The closures will result in a remaining lease liability
of five years or less for about half of the locations.
The closures will affect some 2,000 employees in 13 markets and will
result in a restructuring charge of up to $140 million in the fourth
quarter of this year.
"In a better retail climate, we could have given these stores
more time to improve," said Ames' Chair/CEO, Joseph Ettore.
"We feel, however, that it is in the company's best interest to
put our efforts into proven stores and into promising new ones, such
as those new urban locations doing so well in Chicago and
Ames will limit its new store openings to five in 2001, and will
reduce capital expenditures next year by nearly $100 million from
this year's levels. The company also promises to cut selling and
administrative costs, reduce inventory, and improve logistics. These
efforts should reduce cash flow requirements by almost $150 million,
"We are taking prompt corrective action now so that we can be
properly positioned for an improved year in 2001, despite the retail
climate," Ettore said.
The action was taken after a disappointing earning report for the
third quarter which ended October 28th. Net sales for the quarter
rose 4.2% to $920.3 million, but same-store sales fell 2.7%. The
result was an earnings loss of $37.2 million, or $1.27/share.
Officials also lowered their same-store sales estimates for the
fourth quarter to "flat", which would result in
fourth-quarter earnings to be $2.00/share and a loss of $1.00/share
for the fiscal year which ends February 3rd.
"Our new estimates reflect the heavy impact on our customers of
higher energy prices, rising interest rates, and tightening consumer
credit that have both reduced their spending power and made them
more conservative shoppers," Ettore explained.
(Comment: We learned from a former Ames' executive that at
least part of the problem has been the different pricing
philosophies of Ames and Hills. Hills' customers, our source told
us, were accustomed to everyday low prices, while Ames operated on a
higher-price-numerous-sales philosophy, which some Hills' customers
Despite the problems, Ettore remains hopeful. "Response has
been particularly strong to our Toy Book sale," he said,
"and we continue to build our customer base through our 55 Gold
program, which targets older shoppers. Our inventories are
well-positioned for the holidays with clean, fresh merchandise and
we expect minimal clearance markdowns when the season ends."
WAL-MART BREAKS MORE RECORDS
Sales for the third quarter ending October 31st rose 13% to a record
$45.7 billion. Same-store sales rose 4.5%. Net income rose 5.8% to a
record $1.369 billion, or $0.31 per share. The earnings met Wall
Street expectations. The Wal-Mart Stores segment had sales of $29.2
billion, up 10.5% and operating profit rose $2.2 billion, up 12.8%.
President/CEO Lee Scott said, "We are pleased that in a
difficult quarter we were able to achieve record sales and earnings.
We gained market share and generated good earnings growth in a
challenging retail environment. This is a tribute to our associates
around the world who remain completely focused on serving the local
needs of their customers."
JO-ANN'S 4TH QUARTER OUTLOOK
In order to equal last year's fourth-quarter performance, officials
said, Jo-Ann's needs to achieve a same-store sales gain of 4.3% --
and they are doubtful that will happen. "We are concerned about
the overall economic environment and our ability to achieve our
original sales target for the quarter," said Chair/CEO Alan
"If recent sales trends, which are running below planned
levels, were to continue, the company's ability to achieve the
earnings estimate for the fourth quarter is unlikely," a press
release said. "However, the company, at this time, does not
possess enough information to set revised earnings
Yet Rosskamm sees progress with the company's internal problems. He
said, "As we enter the important fourth quarter, we are in
generally good shape on overall inventory levels and feel we have a
compelling seasonal merchandise offering. The out-of-stock problems
that plagued our third quarter performance have been isolated to our
craft business as we enter the fourth quarter. Our internal team is
working hard to correct remaining craft out-of- stocks as quickly as
Officials said they will have a better idea of the fourth-quarter
performance when it announces November sales figures on November
30th, which will include the important Thanksgiving holiday weekend.
Jo-Ann's also announced it will conform its fiscal year to the
reporting calendar endorsed by the National Retail Federation, which
recommends a fiscal year ending on the Saturday closest to January
31. As a result, the company will add a 53rd week to the current
fiscal year and end the year on February 3, 2001.
RAG SHOPS TOPS $100 MILLION
It was a significantly better year for Rag Shops. For the
fiscal year ending September 2nd, net income jumped to $1.4 million,
or $.29/share, compared to $402,000, or $.08/share the prior year.
Total sales rose 5.7% to $100.2 million, a record. Same store sales
increased 4.2%. However, sales include one additional week this
fiscal year which amounted to $1.5 million. Without the additional
week, sales increased 4.1% and same store sales rose 2.5%.
Officials attributed the improvements to higher same-store sales,
better gross margins thanks to favorable inventory shrinkage
results, better leveraging of operating expenses, the additional
week of sales, and the cumulative effect of a change in accounting
for merchandise inventories.
For the fourth quarter, sales rose 10.7% to $22.8 million. There was
a net loss of $550,000, an improvement of almost 30%. The store
count is 66, with plans to open at least four new stores and close
three existing stores.
ADVICE ON TRADE SHOWS
The trade show season will soon be upon us again and given the cost
of travel, hotels, booths, etc., it's incumbent on exhibitors to
maximize their investments. Some suggestions:
1. The January issues of the trade magazines will be filled
with photos and descriptions of new products -- regardless of
whether you advertise. But space is limited and deadlines are right
about now. Email the editors to see if there's still time to
send material: CNA's Karen Ancona is email@example.com;
Craftrends' Bill Gardner is firstname.lastname@example.org.
2. The trade's January issues are the best read issues of the
year. If you're going to advertise, now's the time. Ad deadlines are
later than editorial, so there's time -- and the magazines will make
the ads for you, if necessary. The editors can tell you who to call.
3. If a trade show such as HIA has a press room, send
a press kit. You can't assume each member of the press will stop by
your booth. When and where to send a press kit should be included in
your exhibitor packet; otherwise, contact the show sponsor.
4. Don't assume buyers you want to see will stop, either.
Call or email in advance to try to make an appointment. Use the
pre-show appointment hours. Schedule breakfast, lunch, and dinner
meetings. (Keep in mind that many companies do not allow their
buyers to accept free meals, but many could join you for a meal and
ask for separate checks.)
5. Send a postcard to important buyers telling them you have
a new line, your booth number, etc.
6. Attend as many show functions as possible. Speeches,
banquets, annual and sectional meetings, etc., are excellent places
to meet people.
7. Keep your expectations realistic. You will not write a lot
of orders. The success of your show will depend on your follow-up.
8. Don't lose valuable time attending to personal matters.
Pack any medicine you might need. Wear comfortable shoes. (It's easy
to spot women who are trade show rookies; they're wearing high
heels.) Pack for the trip with the idea you're going to a marathon,
because you are.
RANDOM NOTES, RANDOM THOUGHTS
1. Sometimes the sale of a company is held up by, among other
things, environmental concerns. We know of one company whose
acquisition was all wrapped up, until government inspectors came in
and found pollution on the land. Apparently the previous owner had
dumped something or other on the land, before such inspections, and
the company never knew it. Then it couldn't sell itself until it had
cleaned up the land -- often an expensive task.
If there was a simple, hard-and-fast, national rule about all this,
I'd report on it, but there isn't. Often it's a state-by-state issue
regarding the land, asbestos, lead paint, etc.
So be warned, before you get actively involved in selling your
business, learn the applicable laws, and perhaps pay for pre-sale
inspections so you're not hit with expensive, last-minute surprises.
2. As we reported in our last issue, new SEC accounting
guidelines are affecting comparative same-store sales figures. Ames
officials said the chain recorded almost $37 million in layaways in
October. Under the new rules, money will not be recorded as sales
until November and December when customers pick up their
3. Recently my wife met Raymond Bramucci, Assistant
Secretary, U.S. Department of Labor. During the conversation,
Bramucci called the economy "vicious" for the way
investors punish companies who don't meet earnings expectations
(realistic or not). That's certainly true the way stockholders have
reacted (over-reacted?) to our industry's stocks.
ELECTION. Alan Rosskamm, Chair/CEO of Jo-Ann's, was
re-elected president of the HIA board of directors. The other
board officers will be elected in January.
HIA AWARDS. Bill Gardner (Craftrends) and volunteers
for Creating For Life will receive a Special Recognition
award at the Awards Banquet in January. Creating For Life,
the annual auction held during the ACCI show has raised more
than $225,000 for AIDS research and education ... The President's
Award will be given to television personality Carol Duvall, and
a posthumous President's Award will be given to the family of
Wally Raley, founder of Delta ... Lifetime Member
awards will go to retired craft retailer and HIA board member Pete
Hickman and to Edna and the now deceased John Clapper, who founded Pack-O-Fun
(kids craft) magazine and Clapper Communications in 1951.
MANAGERS WANTED. Exclusive needlework stores, one in the
Northeast and one in Toronto, need store managers. Salaries in the
$50K+ range. For more information, in complete confidence, call Mike
Hartnett at 309-925-5593 or email email@example.com.
REGULATIONS. OSHA issued new ergonomic safety regulations
which go into effect January 16th and include up to 90 days of
employer-paid sick leave. This could be relevant for companies with
employees spending extensive time at a computer or working in a
HIA. Has postponed Press Day, which was to have been
held next spring to concentrate on other consumer awareness efforts,
such as the Crafts. Discover Life's Little Pleasures branding
LAWSUIT. Wal-Mart and some other major retailers are suing
MasterCard and Visa for $8.1 billion, claiming the credit card
companies are forcing retailers to accept all payment vehicles the
card companies offer. Now the pair are accusing Wal-Mart of
illegally destroying relevant evidence and want Wal-Mart dismissed
from the case, the Wall Street Journal reported.
AWARDS. Beth Wheeler and Barbie Vasek received Designers
with Heart award and Mary Strouse's design won the SCD
award for the 2000 Seminar pin design ... Ken Tacony of Tacony
Corp. won the 8th annual Schmetz Golden Needle award.
BANKS. As part of its restructuring (see article above) Ames
received approval from its bank-lending group that permits a
quarterly rather than a monthly test, as currently required, for
Fixed Charge Coverage Ratio. There is no test limiting availability
to the entire $650 million facility.
ROLODEX. Bill Neu and his Collaborative Opportunity
Marketing moved to 6560 Hutton Ranch Rd., Flagstaff, AZ 86004.
Phone/fax is 520-522-0388; email Bneu@neucom.com;
www.neucom.org. Bill also leads the
where consumers can purchase completed works by some of our
industry's best decorative painters and designers ... On November
30th Betty Christy and Christy Crafts moves to 2600 Finley
Rd., #3208, Lombard, IL 60148. 630-889-9152; fax 630-889-9153. The
P.O. address (Box 492, Hinsdale, IL 60521) remains the same.
JOB HUNTING? Midwest importer is looking for a senior level
sales manager with experience in the craft and/or gift and/or floral
industry. Salary will be tied to performance and experience and will
be at the high end. For more, contact Mike Hartnett, in complete
confidence, at 309-925-5593 or email firstname.lastname@example.org.
NEW BOOK. The book created to defray the costs of legal
assistance to shut down the Internet sites illegally posting
copyrighted needlework and craft projects is Celebration of
Stitching. It will have projects from many of the industry's top
designers and publishers. The 96-page book will be released February
1st and will retail for $16.95.
PEOPLE. Rag Shops added COO/President to Stanley Berenzweig's
titles of Chair/CEO. Michael Aaronson resigned as president/coo
effective last Friday.
REORGANIZE. The HIA board created a new position, Vice
President/Member Services and Programs, and merged the Consumer
Market Development and the Public Relations committees into the
Consumer and Public Relations committee ... The board also decided
to elect all its officers in the Fall beginning in 2001. Previously
only the president was elected in the fall.
HONOR. Gail Czcech of The Creative Network was
nominated and elected to the Leadership Development Board for
the National Personnel Association.
MEDIA. Crafts and Decorating Showcase, the consumer
magazine published by Meredith/Better Homes & Gardens Craft
Division is now called Creative Home.
RATINGS. Last month Fitch lowered its rating on Shopko,
owner of the Pamida chain, to Negative from Stable,
and in mid-November Standard & Poor's placed Shopko's
triple-'B'-minus corporate credit and senior unsecured debt ratings
on "CreditWatch with negative implications." ... In early
November Standard & Poor's lowered its corporate credit, senior
secured debt, and senior unsecured debt ratings on Ames to
single-'B' from single-'B'-plus.
WARNING. Duckwall-ALCO said it expects diluted earnings/share
for the third quarter ended October 29 to be approximately $0.06,
compared with $0.20 last year. Higher energy prices and warm weather
hurting sales of cold-weather products were the causes, officials
INTERNET AND E-COMMERCE UPDATE
SITES. Michaels has begun phase two of its Michaels.com
site with full assortments of books, gifts, and arts and craft
products, in addition to the wide variety of framed prints and
posters currently available ... The site will begin a series of
"celebrity chats" featuring relatively well known craft
designers. The first is elinor peace bailey(TM) online for a free,
moderated online chat December 4th at 7 pm EST.
COPYRIGHT. The Supreme Court agreed to review a lower court
case and decide whether publishers may legally put the work of
freelance writers in electronic databases without the authors'
permission or additional payment.
EMAIL: A VENDOR REACTS TO DUPEY
In our last issue we reported that the creditors' committee in the MJDesigns'
bankruptcy case had filed suit against former president Mike Dupey,
charging him with personal extravagance before and after the
bankruptcy filing. Here's a reaction emailed to us from a vendor:
"Under the heading Been There Done That', I didn't declare
bankruptcy, but had to close a company once under rather unfavorable
"I'm positive that Dupey knew the shape that his company was
in. If he was off on a buying trip to NY and spending $15K on limos
and $67K on diamond rings and asking companies to ship him, when
inside his head he knew they had a real good chance of not getting
paid, then he is one sick dude. He should have been putting those
dollars to much better use.
"Taxis may have been $1K and a $67K cut in salary would have
put another $81,000 in the pot for creditors. Do that a few times --
and let his brains outweigh his ego by getting out of the
ridiculously overbuilt headquarters building, and many other
people's businesses are better off.
"I say Let the dogs and lawyers loose' if they can show he
wasted any dollars through extravagance at that time.
"Although I'm still bothered personally about my previous
business, at least I know that I did all that I could to repay the
creditors; from that standpoint my conscience is clear."
Note: The author, who requested his name not be listed, is
referring to one of the charges that when Mike was on a buying trip
in New York, he charged a $67,000 diamond ring to a company charge
card. One of Mike's lawyers told us Mike wanted to buy the ring for
his wife but his personal card did not have enough credit. When he
returned home he reimbursed the company from his personal funds. And
remember, the current MJDesigns, with stores in the Dallas
area, is not affected by the bankruptcy or the creditors' lawsuit.
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: Design Dept. Mgr. (crafts) ... Marketing Mgr.
MID ATLANTIC: Key Account Mgr. (craft, gift experience).
NEW ENGLAND: Dir. of Sales and Marketing (gift, novelty) ...
Marketing Mgr. (soft goods) ... Sports Merchandise Mgr. (sporting
NORTH CENTRAL: Book/Catalog Layout Artist ... CopyWriter ...
Dir. of Product Development (home dec accessories/gifts) ... Product
Development/Designers (gifts/collectibles) ... Sr. Product
Development (w/licensing experience -- gifts/collectibles).
PACIFIC: Assistant Brand Mgr. (crafts) ... Brand Manager
(craft/hobby) ... Dir. of Product Development (gifts/collectibles)
... Print Production Mgr. ... Product Mgr. (memory).
SOUTH CENTRAL: Marketing Communications (retail).
CREATIVE NETWORK: JOBS OF THE
Position: Marketing Manager ... Location: New England
... Salary: $50-60K ... Description: Create innovative
marketing plans; direct the development of a comprehensive product
marketing cycle with other possible duties and responsibilities;
manage an in-house design team to design products ... Qualifications:
A strong understanding of trends and consumer thinking ( a definite
plus if within the home decor and lifestyle product categories).
Strong interpersonal skills and management experience.
Position: Key Account Manager ... Location: New Jersey
... Salary: $55-60K, + bonus ... Description: Develop
and implement sales and account plans; maintain customer
satisfaction; establish strategic alliances with key accounts;
convey the company image of quality & market leadership;
establish a positive rapport with company departments; manage
administrative areas. ... Qualifications: Proven experience
in sales, consumer products, and multiple trade channels (including
the craft industry and distributors); a successful record evaluating
and analyzing business situations; patience, integrity, and
organizaion skills; be a big picture thinker, innovator, and risk
taker; ability to work with a foreign parent and to travel 35-50%.
B.A. is required, as well as 3-5 years experience.
For more about these positions, contact The Creative Network
THE CLN RETAIL INDEX
A. C. Moore (ACMR). Last*: 6 3/8 ... Change**: -1/4
Ames (AMES). Last*: 2 31/32 ... Change**: -1 3/4
Hancock Fabrics (HKF). Last*: 4 9/16 ... Change**: -1/16
Jo-Ann Stores (JAS.A) [a]. Last*: 6 1/2 ... Change**: -1/16
Michaels (MIKE). Last*: 28 3/4 ... Change**: -3/8
Rag Shops (RAGS). Last*: 2 9/32 ... Change**: +9/32
Wal-Mart (WMT). Last*: 48 9/16 ... Change**: +1 3/16
CLN Retail Index. Last*: 100.001 ... Change**: -0.03%
Dow Jones Index. Last*: 10,629.87 ... Change**: -1.8%
*Nov. 17 ** from Nov. 3 [a] voting share Note: Prices are
exclusive of dividends
Craftopia.com, the large e-commerce site, has a section for craft
jokes. Three examples:
Q: How many crafters does it take to change a light bulb?
A: None. They were too busy decorating the shade.
A young woman walks into a craft store and looks at the needlepoint
"Do you have anything with a sentimental message?" she
"Here's a lovely one: To the only man I ever loved,'" says
"Great," the young woman replies. "I'll take
Crafts salesclerk: "This craft knife will do half your work for
Customer: "Good. I'll take two."
To read more, go to http://www.craftopia.com/shop/redirect.asp?emr=b83a4.
Note: Creative Leisure News is published on the
first and third Mondays of each month. Your next issue will be
Monday, December 4th.
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 to email@example.com.
AND OUR VERY BEST WISHES FOR A HAPPY THANKSGIVING!