Home
Business-Wise
Kate's Collage
"Vinny Da Vendor"
"Benny Da Buyer"
Kizer & Bender
Memory, Paper & Stamps
Category Reports
Designing Perspectives
Scene & Heard


Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
Phone: 785-760-5071
Email: mike@clnonline.com

 

 


Date: December 18, 2000
Vol. IV, No. 24

Printer Version

TABLE OF CONTENTS

bulletCommentary
bulletWang's Files for Bankruptcy
bulletChristmas: Not So Hot
bulletTop Stories of 2000
bulletChallenges for the Chains in 2001
bulletHow the Industry Has Changed
bulletReminders
bulletRandom Notes, Random Thoughts
bulletMiscellaneous News
bulletInternet & E-Commerce News
bulletThe Creative Network: Job Openings
bulletThe CLN Retail Stock Index
bulletNewsflash from the Future

COMMENTARY

"There's only about six customers left in this marketplace," is a commonly heard refrain these days. Common, but wrong. The independents are still out there, and can provide a viable source of sales for even the largest vendor. Two cases in point:

1. I recently finished a profile of the Sierra Pacific Crafts group that will run in the January issue of CNA magazine. SPC consists of 24 independents operating 58 stores from Illinois to Japan. The collective size struck me and I wrote, "If these stores were owned by a single entity, they would comprise the fifth largest craft/sewing chain in the industry, after Michaels, Jo-Ann's, Hobby Lobby, and Hancock."

2. Karen Ancona, CNA's Editor, recently faxed me the basic data of a new study CNA commissioned regarding the impressive sales of independents. The results may surprise you.

The bottom line is this: if you're ignoring the independent, you do so at your own peril.

Karen will announce the highlights of the survey at our HIA seminar ("The State of Retailing: Independents Speak Out") in January, and publish the complete study in February.

Ever since I reported in the last issue about the seminar, Karen and I have received calls from manufacturers wanting to attend. Turns out, HIA rules prohibit manufacturers from buying workshop tickets! So Karen is getting some seminar tickets (4-5:30 pm, Tuesday, January 30th). If you're not a retailer and would like to attend, email me or Karen and we'll get you a ticket.

[ top ]

WANG'S FILES FOR BANKRUPTCY

Wang's International filed for bankruptcy protection under Chapter 11 on December 5th. The company has been a major industry force almost since Robert Wang began selling macrame cord from the trunk of his car. He soon became a distributor and a leader in the craft and home dec industries.

Robert said, "The company appreciates the support of its communities, thousands of customers, vendors, and all associates of the company. Unfortunately, the company suffered enormous losses as a result of business interruption during a system conversion in 1999.

"The company remains committed to restoring profitability," Robert added, "and obtaining a confirmed plan of reorganization during 2001."

(Comment: Many companies don't make it out of bankruptcy, but I wouldn't bet against Robert. He probably is the best trend-spotter the industry has ever seen.)

CHRISTMAS: NOT SO HOT

Holiday sales are so mediocre that some economists are predicting the Federal Reserve will actually lower interest rates early next year to energize the economy. The International Council of Shopping Centers reported sales growth at specialty stores in the nation's malls actually decreased 9.8% for the second full week of the holiday season.

Meanwhile, Salomon Smith Barney retail analyst Richard Church told Dow Jones News that sales at the discount stores he tracks, including Wal-Mart, are falling below his expectations. In fact, Wal-Mart said it expects December same-store sales to be at the low end of its 3-5% increase target for the fourth quarter because of below-plan sales the first week of December.

The lackluster sales have caused more frequent promotions and deeper discounts -- and now bad weather has hit much of the country.

[ top ]

TOP STORIES OF 2000

2000 was yet another eventful year for our ever-changing industry. Here's a summary of the events and people who made headlines:

1. Product Trends. The year didn't see any particularly hot new categories, but memories, candles-candlemaking, soapmaking, beads, stamping, jewelry, kids, and glass led the way. Painting and quilting remained strong, and knitting and crochet sales grew. In general, strong 1999 sales carried into 2000, but slowly cooled as the year progressed.

2. Decline of Ames' Stock. Chair/CEO Joe Ettore was named the turnaround retailer of the decade by Discount Store News about the time problems arose with the recently acquired Hills chain. End result: at press time the stock had lost about 95% of its value since its 52-week high in December, 1999. Layoffs, and a 32 store closures were announced late in the year.

3. Industry Consolidation. The trend continues. Westrim to Bemiss Jason ... Wright's to Conso ... Noodle Kidoodle to Zany Brainy ... Wholesale Florist to Michaels ... The European distributor, Jonco, to Plaid ... ArtCraft to MacPherson's ... Binney & Smith's Liquitex brand to ColArt ... Pfaff to Husqvarna ... and numerous smaller mergers and acquisitions.

4. Bankruptcies. The legal aftermath of the MJDesigns case continued, although it doesn't affect the "new" MJDesigns ... Some e-commerce startups, including CraftShop.com ... Singer continued in bankruptcy ... World Bazaar ... Artis went bankrupt for the second -- and last -- time. The remaining assets were sold to Duncan, which plans to continue the popular tv series, Aleene's Creative Living ... Wang's (see story above).

5. The Passing of Pioneers. Delta's founder, Wally Raley, and Zim's co-founder, Cliff Zimmerman, passed away within days of each other ... Longtime retailer and NAMTA leader Stan Obermiller also passed away, as did a number of other industry personalities, including Jim Fiege, Linda Watson, and Bob Elder.

6. Computer Snafus. Changing computer systems can be a mess, as proven with the Jo-Ann's case, although the company is well along the road to recovery. However, Wang's did not escape so easily, and some well known vendors are also struggling with the problem.

7. Jail for Perlmutter. Bob Perlmutter, the president of the Pearl Arts & Crafts chain in New York and Florida, pled guilty on tax evasion charges for skimming money from the stores and paying contractors under the table for building his mansion, the largest home in Broward County, Florida.

8. National Promotions. The Society of Decorative Painters' Learn To Paint day ... The Craft Yarn Council of America's Knit Out 2000 in New York and cities across the country ... HIA's National Craft Month and "Crafts. Discover Life's Little Pleasures" branding campaign brought the pleasures of our industry's products to millions of consumers.

9. National Publicity. Whether it was Rosie O'Donnell raving about Modge Podge and decoupage on her tv show, actress Julia Roberts telling national magazines she'd like to open a craft store someday, Katie Couric crafting on NBC's Today Show, the growth of industry related television series on PBS, or celebrities raving about knitting and crochet, the amount of publicity in national, mainstream media was unprecedented.

Latest example: the January, 2001 issue of McCall's contains a complete how-to to knit Julia Roberts' sweater. The how-to's intro quotes Roberts saying she's teaching other movie stars to knit. McCall's got the pattern from L'Atellier, a knit shop in Santa Monica.

10. Copyright Problems. Consumers scanning copyrighted books, projects, and charts and posting them on Internet sites grew to such proportions that it attracted national publicity. But the industry rallied and formed groups through the Home Sewing Association and the International Needlework Retailers Guild to fight the problem through consumer education, working with the host sites, and planning/threatening legal action.

11. E-Commerce. As we reported in our last issue, the bubble began to burst soon after the 2000 HIA show. Survivors include Michaels.com, Joann.com, MisterArt.com, Craftopia.com, and sites operated by independent brick-and-mortar retailers and mail order companies.

12. Growth of Independents. Are there more independents than there were five years ago? No, but their number increased this year. The growth is coming primarily from new scrapbook and rubber stamp stores, but we've seen some new needlework shops, too.

13. Wal-Mart. The retailing behemoth continued to increase sales at a rate of more than $1 billion per month, but it was not without problems. For example, a test of packaged, pre-cut fabric was abandoned. The e-commerce site which originally contained a smattering of craft and sewing supplies was re-designed and the products related to our industry were dropped.

[ top ]

Challenges for the Chains in 2001

A.C. Moore. The company has always been known for its well-stocked shelves. As the company expands further and further away from its base, can it maintain that reputation?

Ames. Stop history from repeating itself. In the late 80's Ames bought the Zayre discount store chain. The ensuing problems put the company in bankruptcy. That bankruptcy started the chain of events which eventually led to the death of Craft World, the Maryland distributor that was once our industry's most powerful company.

Joseph Ettore led Ames out of bankruptcy and was so successful, Discount Store News named him turnaround retailer of the 90's. But Ames bought the Hills discount chain. Problems ensued, and the stock fell more than 90% this year.

Hancock. The company made significant progress in restructuring its inventory, rather than opening a large number of stores. Can those changes be sustained and pay off as the national economy cools?

Hobby Lobby. A similar challenge as A.C. Moore's: As the company expands further and further away from its Oklahoma City base, can it maintain the same high level of inventory replenishment?

Jo-Ann's. The company was plagued with computer foul-ups due to a systems conversion. Many of them appear to be solved, but all the bugs must be eliminated. The new California warehouse needs to be integrated into the system, and a replacement for VP Jane Aggers must be found.

Michaels. In the early 90's an aggressive store-opening plan brought the company close to bankruptcy. The company is in the midst of another aggressive plan, but this time management seems to have the internal structure in place to handle the growth. Still, the company is finding itself competing in more and more cities with Hobby Lobby, Jo-Ann etc, and strong independents.

There's also the challenge of keeping Wall Street happy, which seems to punish Michaels for the least little glitch in its progress.

Rag Shops. A similar situation to Hancock's. The company has focused on internal and inventory improvements which seem to be paying off. Can the company continue to sustain the progress it's made?

Wal-Mart. The company keeps pushing to maintain a successful sewing department with less inventory and personnel. How much can you cut and still have a viable department? If the major appliance test is successful and rolled out nationwide, critical decisions will need to be made concerning the departments in the back of the stores.

[ top ]

HOW THE INDUSTRY HAS CHANGED

Bill Shugarts left Fibercraft in 1994 and now leads Reynolds Consumer Products' craft effort. I interviewed Bill for an article appearing in the January issue of CNA and asked him how the industry has changed in the past six years.

Bill said, "The industry is more sophisticated now in terms of designing, marketing, and manufacturing, which is good for growth and positioning into other related industries ...."

Proving Bill's point, a few days later Plaid President Mike McCooey commented about the personnel changes at Plaid. Mike said accurately, "With the advent of category management, channel marketing, and customer-specific programs, the lines between sales and marketing are increasingly blurred."

Talk about changes! When Bill left Fibercraft, no one had even heard of the terms, "category management" or "channel marketing."

[ top ]

REMINDERS

1. Your username and password are case sensitive. In other words, if your password is Mike, mike or MIKE will not work. 2. If you forget your username and password, click on "Forget Your Password?" in the left-hand column.

RANDOM NOTES, RANDOM THOUGHTS

1. Here's an example of how the Midwestern storms are affecting holiday sales: Peoria, Illinois has one of the most successful (in terms of sales/sq. ft.) shopping malls in the country. It closed early twice last week because of the weather -- and a tv news report interviewed a store manager who said sales were "awful."

2. It's now too late to send new product info to the trade magazines in time for their January, trade show issues. But there will be two issues of Creative Leisure News before the HIA show, so send info to me. (Please, only info that didn't make it to the trade magazines in time. This is a newsletter and I don't want to turn it into an epic filled with material readers can get elsewhere.)

The magazines will no doubt have post-show product coverage, but don't assume the editors will make it to your booth to pick up the new product material. They will, however, scoop up everything in the press room, so make sure you have about 50 copies of your press releases in the press room.

3. Karen Ancona, the Editor of CNA, is looking for interesting occupations people had before they entered our industry. So far we've collected a college dean, an undertaker, numerous teachers, an engineer, a cab driver, a florist, and a nurse. Know of any? Send me a note and I'll pass it along to Karen. When she has enough, she'll do an article in CNA.

4. Our world is getting entirely too complicated. I received an email last week from an industry friend whose computer automatically lists his "numbers" at the bottom. He has business and home addresses, an 800 phone number and a regular business number, a fax number, and another fax number to his laptop, a home phone, a mobile phone, and two websites. Then, of course he has a Social Security number, driver's license number, and probably numerous usernames and password.

It's no wonder some of you forget your passwords to this site! If you do, just click on the "Forget Your Password?" button in the left-hand column of your main page.

The annual directory issues of the trade magazines are not as profitable as they were because all that was necessary was the company's name, address, and phone. Now it includes an 800 number, fax number, email, and website. Each listing now takes twice as much space.

[ top ]

MISCELLANEOUS NEWS

FABRIC. We've received unconfirmed reports that Wal-Mart has stopped its test of pre-packaged fabric.

ACQUISITION. Duncan acquired Wire Art, a Vermont manufacturer of activity kits featuring coated wire, beads, tools, and accessories for kids 7-12. Manufacturing, marketing, and sales moved to Duncan's facilities in Fresno. Wire Art's founder, Chris Gluck, continues as marketing consultant for the award-winning product line.

PEOPLE. Bill Neu is VP/Sales & Marketing for Jones Tones. He will also continue with his websites, Homedecorshowcase.com and neucom.org ... DMC named Robin Scheer Ettinger as VP, Marketing. Ettinger has held various marketing positions with companies such as Godiva Chocolatier, Liz Claiborne, the World Gold Council, and Escada.

AMES. Entered into an amendment agreement with its lenders that allows Ames to record restructuring charges associated with closing 32 stores. Subsequently, Ames announced it will take a $140 million charge in the fourth quarter and report a loss for the year.

NEW. Head Starts merged with a private label manufacturer to form HSI Manufacturing, offering the same product line (canvas items, denim, etc.), now from a 40,000 sq. ft., state-of-the-art facility. Contact Scott Nicholson at 631-366-0183 or scottn@optline.net. The address is Brooklyn Navy Yard, Bld. #5, 2nd floor, Brooklyn, NY 11205.


ZANY BRAINY. Third quarter revenues rose 0.1% to $76.4 million, and same-store sales fell 10%. The net loss from continuing operations, excluding merger-related charges and losses related to ZanyBrainy.com, was $7.9 million, compared to a net loss of $4.2 million a year ago. There was no hot toy, such as Pokemon, this season, officials said. On Friday the stock hit a new 52-week low at 78 cents/share.

RATING. Banc of America Securities initiated coverage of Wal-Mart at Market Perform ... Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on Shopko, owner of the Pamida chain, to double-'B'-plus from triple-'B'-minus. The ratings remain on CreditWatch "with negative implications", where they were placed in November.

PEOPLE. Popular industry veteran Jane Anne Davis left Plaid to return to school and spend more time with her family. As a result, Mark Hill is now Sr. VP/Sales & Marketing and Dianne Woellner-Krupp is VP/ Marketing.

STOCK. Michaels repurchased all five million shares of its common stock authorized under its 1999 Stock Repurchase Program. That's about 15% of the approximately 32.3 million outstanding shares. The board also approved the repurchase of another one million shares. CEO Michael Rouleau said, "We believe that our stock is currently undervalued by the market. Given the strength of our balance sheet and cash flow, we have the flexibility to make these repurchases ... without compromising our growth plans."

SURVEY. An ACCI Internet survey revealed 51% of crafters receive their project ideas and motivation from instruction books; 22% from magazines; 8% from TV series; 6% from in-store displays and demos. 12% said "none of the above".

TOYS. Consolidated Stores is selling its KB Toys chain to the KB management team, led by CEO Michael Glazer. The team has partnered with Bain Capital, the venture capital company that purchased Tulip and drove it into the ground until selling it to Duncan. (Now sales are rebounding under Duncan's leadership.)

HANCOCK. CEO Larry Kirk gave an impressive, positive presentation about the state of Hancock Fabrics at a recent Notions Roundtable meeting, attendees tell us.

MEDIA. The December 25th edition of Forbes has an interesting article on quilting.


DESIGN. ACCI and the Society of Craft Designers will again sponsor the Designs for Living display and the Designer Forum at the Chicago ACCI show July 20-23, 2001. Participation forms will be mailed this month. Call 740-452-4541 or e-mail acci-info@offinger.com or scd@offinger.com.

OVERSEAS. Wal-Mart plans to open another 50 stores in Germany by 2003 and 5 more in China. The discounter already operates 95 German stores and five stores in the Hong Kong border city of Shenzhen which do $100 million in sales, reported the Wall Street Journal.

[ top ]

INTERNET & E-COMMERCE NEWS

WEB SERVICE. Noted industry magazine editor and web pro Helene Rush has established a website development service. You can check out her services at http://www.icreateshop.com or contact her at hrush@gwi.net.

ZANY BRAINY. Ended its Internet joint venture with Online Retail Partners and will assume full ownership of its e-commerce site, ZanyBrainy.com.

SITES. According to Verizon, the number of small businesses that created a website to establish and promote business increased by 123% from 1999 to 2000 -- but small businesses going online this year intending to sell products actually decreased by 48%.

NEW SITE. UnitedStatesCrafts.com has recently become operational and is recruiting professional crafters and consumers to sell their projects at the site.

CRASH. The re-designed Wal-Mart site crashed for 90 minutes one day in mid December. That came after Media Metrix estimated Walmart.com's traffic to barely be among the top 50 retail sites, eMarketer reported.

[ top ]

THE CREATIVE NETWORK: JOB OPENINGS

The Creative Network is the only personnel recruitment firm specializing in our industry. Click on "Jobs" in the lefthand column for the latest job openings and featured job of the month.
[ top ]

THE CLN RETAIL INDEX

A. C. Moore (ACMR). Last*: 7 9/16 ... Change**: +13/16
Ames (AMES). Last*: 1 9/16 ... Change**: -1/2
Hancock Fabrics (HKF). Last*: 3 9/16 ... Change**: -1/4
Jo-Ann Stores (JAS.A) [a]. Last*: 6 15/16 ... Change**: -3/16
Michaels (MIKE). Last*: 27 1/4 ... Change**: +1
Rag Shops (RAGS). Last*: 2 1/4 ... Change**: -1/8
Wal-Mart (WMT). Last*: 49 7/8 ... Change**: -1
CLN Retail Index. Last*: 99.000 ... Change**: -0.3%
Dow Jones Index. Last*: 10,434.96 ... Change**: +0.6%

*Dec. 15 ** from Dec. 1 [a] voting share Note: Prices are exclusive of dividends

[ top ]

NEWSFLASH ... FROM THE FUTURE

The election is finally over, but this email from a friend was too good to omit:

December 30, 2004

WASHINGTON -- After four years of legal wrangling, George W. Bush was finally declared the winner of the 2000 presidential election yesterday. Bush, a Republican, will take the oath of office at noon today and serve until Jan. 20, 2005, a term of about three weeks. Then he gives way to the winner of the 2004 presidential election, New York Sen. Hillary Rodham Clinton.

Facing a drastically shortened presidency, Bush attempted to strike an optimistic tone last night. "We have a lot to accomplish in the next three weeks," Bush said. "Reforming Social Security alone is probably going to eat up four to five hours. Let's get to work!" Aides yesterday were calling temporary employment agencies in a frantic effort to fill Cabinet posts.

Bush's victory ends a four-year court battle between him and Democratic candidate Al Gore over the results of the 2000 election. While the dispute raged on, the nation installed an interim president: New York Yankees Manager Joe Torre. Torre admitted running a country and a baseball team simultaneously has been a strain. "At times, it's been difficult to keep the two things straight. Although, in retrospect, trading Jesse Helms to the Red Sox turned out OK."

Torre's four years in office were marked by continued prosperity at home and relative calm abroad. His most controversial move was appointing Yankees bench coach Don Zimmer to the Supreme Court. Critics charged that Zimmer lacked experience. He also spit tobacco juice on Antonin Scalia's shoes, angering conservatives. Torre's boldest foreign policy initiative was making Cuba the 51st state in an effort to improve U.S. pitching.

Gore, meanwhile, has yet to concede defeat. The former vice president issued a statement today saying, "It would be improper and disrespectful to the democratic process to act hastily before all the facts are known."

Observers said the biggest challenge for the Bush administration will be working with Congress, which adjourns tomorrow and isn't expected back until after Bush's term ends. "One day may not be quite enough time to overhaul the tax system," a Bush aide admitted. "But maybe we can get started and then finish it later with a big conference call or something."

Meanwhile, Bush also must work on his legacy and prepare to transfer power to President-elect Clinton. Clinton yesterday wished Bush well and asked if she could start moving some boxes into the White House basement where, she says, she plans to keep her husband.

[ top ]

Note: Creative Leisure News is published on the first and third Mondays of each month. Your next issue will be postponed until Tuesday, January 2nd. Because after all, if you're working on January 1st, you're starting the new year working waaaay too hard!

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 mike@clnonline.com.

MY VERY BEST WISHES FOR A JOYOUS HOLIDAY SEASON AND A HEALTHY, PROSPEROUS NEW YEAR!

xxx

[ top ]
 

horizontal rule

horizontal rule