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Date: May 16, 2011
Vol. XIV, No. 10, #326

Printer Version

TABLE OF CONTENTS

bulletCommentary: Handling a PR Problem
bulletNew Column This Issue
bulletTake the CLN Poll: Gas Prices & Industry Sales
bulletCLN Poll: The U.S. Economy
bulletSteve Berger Leaves CHA
bulletCredit Card Fraud Hits Michaels
bulletMore CHA News
bulletA.C. Moore: Losses Less Than Expected
bulletBlue Moon Beads Declares Chapter 11
bulletThe Cost of Chinese Imports, Pt. II
bulletThe Cost of Chinese Imports, Pt. III
bulletA Virtual Trade Show That's Really Virtual
bulletColonial Needle Buys Presencia Hilaturas
bulletApril Sales: Excellent, But ...
bulletRandom Notes, Random Thoughts
bulletMiscellaneous News: Retail
bulletMiscellaneous News: Research
bulletMiscellaneous News
bulletThe Creative Network: Job Openings
bulletThe Rabbi and the Poison
bulletReminders

COMMENTARY: HANDLING A PR PROBLEM

Kudos to Michaels for responding so quickly to the credit card mess (see the report, below). As soon as the problem was discovered, CEO John Menzer emailed an apology/warning to all Michaels' customers, and the company has issued periodic press releases to keep everyone up to date on the situation.

The fact is, if you're in business long enough, something bad, something embarrassing, will happen. It may not be your fault, but it will happen. Whether it's a data security breach, a product recall or whatever, it's best to be upfront and get out in front of the story.

As our politicians have proven repeatedly, denying or trying to cover up a problem just makes matters worse.

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NEW COLUMNS THIS ISSUE

Kizer & Bender. Five easy, basic steps to creating your store's or your product's brand.

Business-Wise. If a huge company such as Michaels can have data security breaches (see article, below), what chance does a small retailer or business have? Here are 10 threats to data security and what to do about them.

(Note: If you click on the column and it's not the column you expected, click the Reload or Refresh button of your browser.)

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TAKE THE CLN POLL: GAS PRICES & INDUSTRY SALES

CLN has heard this week from scrapbook and bead retailers that sales are down because rising gas prices are taking more of the consumer's disposable income. On the other hand, gas prices may inspire consumers to stay home and have a "staycation" rather than travel this summer. More time at home could translate into better industry sales.

So look in your crystal ball and tell CLN what effect high gas prices will have on the industry's sales this year. To vote, click on Industry Polls in the right hand column or click HERE.

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CLN POLL: THE U.S. ECONOMY

CLN voters are not optimistic about the near future of the U.S. economy. In this unscientific poll, almost one third, 32.1%, believe the economy will weaken somewhat, while only 17.95% think it will improve. The rest believe it will remain the same.

They're not optimistic about inflation either; 71.4% think inflation will increase and a mere 3.6% think it will decline. The remainder believes it will stay the same.

(Note: Most of the voting occurred before the death of Osama Bin Laden and at the height of the gas price increases.)

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STEVE BERGER LEAVES CHA

The CHA Board of Directors announced the departure of Steve Berger as President/CEO.  The Board has launched a search for a new chief executive, but no timetable has been set for securing a replacement. In the interim, Tony Lee, VP of Meetings & Expositions, will serve as Acting President/CEO.

Steve had been hired in May of 2003 as Exec Director of HIA  In 2009 he signed a two-year extension to his contract. Among the key events in Berger's tenure: The merger of ACCI and HIA to create CHA, the Society of Craft Designers' union with CHA, the merger of the Canadian Craft & Hobby Assn. with CHA and the launch of the License & Design section at trade shows. There was controversy as well, including moving the 2009 summer show to Orlando and the 2011 winter show to Los Angeles and sponsoring three consumer shows.

Larry Olliges, CHA Board Chair said, "We are saddened to see Steve leave. He has provided strong leadership to the Association and spearheaded many important initiatives within the industry. We have three highly-experienced vice presidents on staff at CHA that will keep the Association moving ahead.  We don't foresee any issues ensuring that key programs will stay on track."

Membership and the size of trade shows rose and declined during Steve's tenure, due primarily to the state of scrapbooking. It was a very hot trend in 2003, but has cooled since then and there has been drastic consolidation.

To CLN's knowledge Steve was only the fourth executive director in CHA/HIA's 71 years.

(Note: Last month CLN interviewed Tony – "Trade Shows: How, Where and Why." The interview is still available HERE.)

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CREDIT CARD FRAUD HITS MICHAELS

What started as tampering with PIN pads in a handful of Chicago suburban stores has spread to stores in 20 states, the Chicago Tribune reported. Michaels has identified 90 key pads in 80 stores; the affected pads have been removed and all of the approximate 7,200 pads will be replaced.

Within hours of the story breaking, Michaels sent an email to customers apologizing and encouraging them to contact their bank and/or credit card company "to check for and report any unauthorized charges, as well as seek their advice on how to protect your account in the event that your information has been taken."

The Tribune cited investigators who said thieves can tamper with PIN pads at checkout counters where customers swipe their debit cards and punch in their secret codes. Once thieves have that information, they create fake debit cards and use them at ATM machines, often in another state, and withdraw money from the debit card's bank account.

"This isn't anything new," security expert Colin Sheppard told the Tribune, "but the attackers appear to be much more organized." It isn't new to our industry's stores, either; a similar situation occurred involving Hancock stores in three states two years ago.

The Tribune cited security experts who offered two possible explanations of how this could occur: 1. Thieves posing as keypad repair contractors are given access to the pads by unsuspecting store employees. 2. Malicious software that infects keypads that are networked together.

"It's actually impressive -- in a bad way, but it's impressive," Lance James, director of intelligence for the security consulting firm Vigilant, told the Tribune. "This one obviously took a lot of coordination. It's like the Al Capone days." To read more, click HERE. To see the list of stores with affected pads, visit www.michaels.com/consumernotices.

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MORE CHA NEWS

1. June 1 is the deadline for submitting a form to nominate yourself or someone else to be considered by the CHA Nominating Committee for a three-year term on the Board of Directors. The form is HERE.

2.  CHA's webinar this Wednesday: is an update on the Consumer Product Safety Improvement Act, by Rick Locker, an attorney who has given excellent CPSIA updates at recent trade shows. The one-hour presentation begins at 1:00 pm ET. To register, click HERE.

3. CHA opened its Exhibitor Success & ROI Center, a new online resource center for trade show exhibitors. The ESRC offers pre-show education through CHA's "Webinar Wednesdays" series; a series of articles on successful exhibiting by Jefferson Davis, president of Competitive Edge, a trade show consulting firm; research and reports from the Center for Exhibition Industry Research; tips and tools for a successful, cost-effective exhibit program; and CHA's Exhibitor Update eNewsletter archive. The goal is to help exhibitors improve their return on trade show investment. Visit www.craftandhobby.org/ESRC.

4. CHA's new system ($25 for a badge, but then seminars, workshops, and special events are free) is resulting in huge increases in registrations (200% increase in seminars, 150% increase in workshops). Visit www.chashow.org.

5. CHA announced the winners of its Creative Retailing contest in conjunction with National Craft Month. First place: Madison Craft & Gift Shops in Madison, WI. … Second place: Ben Franklin Crafts and Frames in Redmond, WA. … Third place: The Stamp Addict in San Diego, CA. To learn more about these retailers' winning promotions, visit HERE.

6. CHA and the Hobby Manufacturers Assn. will offer reciprocal member discounts for exhibit space at their respective trade shows, the 2011 iHobby Expo (Oct. 20-23 in Rosemont), the 2012  iHobby Expo, and the CHA Winter Conference & Trade Show (Jan. 29-Feb. 1, 2012 in Anaheim). The arrangement will provide exhibiting members of each organization with introductions to a broader range of retail stores while introducing retail buyers to expanded ranges of products and product categories.

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A.C. MOORE: LOSSES LESS THAN EXPECTED

Sales for the first quarter declined 2.5% to $102.7 million, due to a 2.6% drop in same-store sales. The number of transactions was down 2.1% and the average ticket dropped 0.5%.

There was a net loss of $7.4 million ($0.30/share), compared to a net loss of $7.6 million ($0.31) a year ago. That was better than analysts' estimates that the loss would be $0.32. the stock rose 2.6% in the hours after the earnings release.

CEO Joseph Jeffries stated, "As anticipated, the shift of the Easter selling season into the second quarter of this year impacted our first quarter results. We remain focused on executing our strategic plan for 2011." He blamed much of the decline on seasonal/Easter sales.

The gross margin improved 10 basis points to 42.9%. Strong performing departments were "celebrations," readymade frames and needle crafts, led by yarn. Selling, general, and administrative expenses declined $1.6 million to $50.7 million. In-store inventory is higher than it was a year ago.

During the quarter the company opened two stores and closed one. The current store count is 135. Earlier in the quarter the company announced it was "exploring strategic alternatives," which is often a code for putting itself up for sale.

To listen to the taped replay of the conference call A.C. Moore execs had with analysts immediately following the release of the sales/earnings report, call 888-203-1112 and enter pin #9061575.

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BLUE MOON BEADS DECLARES CHAPTER 11

One of the best known brands in jewelry-making, Blue Moon Beads, has filed for Chapter 11 bankruptcy protection in the Central District of California, San Fernando Division. The company, whose official title is Westrim Inc. (dba Westrim Crafts) listed $1-$10 million in assets, but $10-$50 million in liabilities and 100-199 creditors. The filing did say funds will be available for unsecured creditors.

The original company, Western Trimming, was an industry pioneer and was owned for many years by Gary Deitsch. The company was eventually sold to an investment firm, Sequoia, which bought Blue Moon Beads, Autumn Leaves, Crop In Style, and Hip in a Hurry under the umbrella, Creativity Inc. The other divisions were sold to ANW Crestwood in 2010. Negotiations to sell Blue Moon had been going for weeks with Die Cuts With a View, but the board eventually decided on the bankruptcy reorganization route; according to the filing papers; however, an eventual sale to DCWV is not out of the question.

A peculiar aspect of the case: although the other divisions such as Autumn Leaves were sold months ago, they still remained on the Creativity Inc. website. CLN's request for clarification was not returned.

(Note: A few days after the filing, Fire Mountain Gems, the mail-order giant, emailed customers announcing a big "Blowout $ale" of 82 newly acquired overstock Blue Moon items.)

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THE COST OF CHINESE IMPORTS, PT. II

In the previous issue, CLN cited China's economic growth rate (9.5%) as fueling rising inflation (5.4% in a single month). Now a recent New York Times article cited yet another reason why the price of Chinese goods will increase: the cost of trucking goods from factories to ports for shipment to the U.S.

That is becoming more critical because higher costs are causing more factories to move inland, further away from the ports. Hence the growing importance of the trucks. Yet "transporting goods by truck in China is relatively more expensive than doing so in the United States," wrote the Times, citing data from the American Trucking Association that trucking goods in the U.S. costs about $1.75/mile, while trucking costs in China’s two biggest export regions are $2.50-$3.00/mile. To read the article, visit HERE.

"Bottom line, the cost of shipping goods in China is going to rise as manufacturing moves away from the coast. Disruptions due to an unstable trucking system are only going to make moving freight harder, less predictable, and more costly in time," wrote Richard Gottlieb in Global Toy News.

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THE COST OF CHINESE IMPORTS, PT III

A recent Wall Street Journal report cited various officials predicting that rising wages in China and higher costs for shipping, plus tax incentives from various states, will inspire manufacturers to return to the U.S. Harold Sirkin, a senior partner at Boston Consulting told the Journal if these trends continue, by 2015, it will make sense to set up production facilities in the U.S.

Jennifer Marks of Home Textiles Today has a similar view in her article "When China Price Is Not So Nice." Read it HERE.

Meanwhile. Wal-Mart CEO Mike Duke recently said that a majority of the retailer's products are now made in the U.S., CNNMoney reported. Surprised? Read the explanation HERE.

Last week there were two days of high-level talks between Chinese and U.S. officials. On the valuation of the yuan, which is seen as giving an unfair advantage to Chinese manufacturers, U.S. Treasury Secretary Timothy Geithner said, "We are seeing very promising shifts in the direction of Chinese economic policy," UPI.Com reported. In the past year the yuan has already appreciated about 10%, the Wall Street Journal reported.

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A VIRTUAL TRADE SHOW THAT'S VERY VIRTUAL

Could a trade show be so virtual that the exhibitors don't even know they're exhibiting? On page 30 of the March issue of Scrapbook Business, there is a full page ad for a virtual trade show, Legacy Craft Expo. CLN went to the site, www.legacycraftexpo.com, and found very little information, other than the dates of the show, June 20-22. The site does include, however, what looks like a floor plan with the logos of various well known scrapbook companies.

But at least some of these companies never heard of the show and are not planning to exhibit; at least one company requested its logos be taken off the site.

When asked about the legality of all this, a lawyer/CLN subscriber said, "Actually if they are using their logos w/o permission, it is trademark infringement, false endorsement, and depending on the logo, it could be copyright infringement as well."

CLN emailed the company with questions, and did not receive an answer, but by that afternoon the site was changed. The date was changed, too, to August 2-4, and beneath  the company logos it said in very small type, "Vendors used for display purposes only and do not reflect actual show participation."

One puzzled vendor who contacted the company did receive an answer, which included directions to an example of how the show would work: A) Go to www.scrapbooktradeexpo.com; B) click on "Tour"; C) click on the Graphic 45 booth located in Hall A.

According to the email, exhibitors can show their products, chat one-on-one with retailers, and receive statistics on what retailers looked at and how long they stayed at the "booth." The retailers will be able to place orders.

Sponsors say the site is still in development but all will be explained in an upcoming, multi-page ad in Scrapbook Business.

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COLONIAL NEEDLE BUYS PRESENCIA HILATURAS

The Colonial Needle Co. acquired Presencia Hilaturas USA. Presencia and Finca cotton threads are 100% Egyptian long staple cotton produced by Presencia SA in Valencia, Spain. Colonial Needle will import and distribute Presencia Sewing/Quilting Thread (40, 50, 60 weight), Finca Perle Cotton (sizes 03, 05, 08, 12, 16 in 5gr and 10gr ball put-up), and Finca Embroidery Floss (6 ply).

Effective July 5 orders for those Presencia and Finca threads will be shipped from and inquiries should be directed to Presencia America, a Colonial Needle company: Call 800-9-NEEDLE (800-963-3353) or email terry@colonialneedle.com.

Presencia and Finca threads complement and expand Colonial's family of needlecraft products, including Lee's Needle Arts hand-painted canvases and self-finishing leather accessories; Colonial Hand Painted Canvas Services; Colonial brand knitting needles; Roxanne brand hand quilting/sewing needles; Glue-Baste-It, and Quilter's Choice marking pencils; Colonial brand notions; and sewing needles sold under the brand names Colonial, John James, Mary Arden, Richard Hemming, Roxanne, and S. Thomas & Sons.

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APRIL SALES: EXCELLENT, BUT….

 The Int. Association of Shopping Centers reported same-store sales rose 8.5% and the 25 retail chains tracked by Thomson Reuters reported an increase of 8.9%. Both figures were better than expected by industry analysts.

The primary reason for the strong sales was Easter; it was three weeks later than in 2010, but when the March-April figures were combined, retailers' sales rose 5.25%, the strongest spring period since 1999.

"The Easter bunny delivered the goods. It showed that the consumer was resilient and sales were better than expected despite some growing headwinds," Ken Perkins, president of the research firm RetailMetrics, told the Associated Press.

But that was offset in part by concern over rising prices for food and gas. Numerous retail execs and analysts warned that if prices continue to rise for gas, food, cotton, etc., that will cut discretionary spending.

A sampling of retailers' same-store sales: Limited Brands (Victoria's Secret, Bath & Body Works), +20% … Target, +13.1% … Costco, +12.0% … Dillard's, +11.0% … Macy's, +10.8% … Kohl's, +10.2% … Ross Stores, +10.0%. … Nordstrom, +7.6% … J.C. Penney,+6.4% … Fred's, +1.8%.

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RANDOM NOTES, RANDOM THOUGHTS

A reader suggested trade associations should do more to stop exhibitors from giving show specials and sneak peaks to retailers who don't attend a trade show. Don't expect that to happen. There are very strict laws about trade groups not doing anything remotely close to fixing prices or they'll lose their non-profit status. So a trade association is not about to tell a manufacturer that he can't give a discount to someone.

The issue is simple: Any exhibitor who does sneak peaks and gives show specials to non-attendees has no right to complain if retailer attendance at trade shows is down.

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MISCELLANEOUS NEWS: RETAIL

CLOSING. E-retailers Addicted to Scrapbooking and Addicted to Rubber Stamping are closing. The owners cited health issues as the reason, Scrapbook Update reported.

RALLY. The city of Grand Junction, CO held a celebration of Osama Bin Laden's death in the parking lot of the local Hobby Lobby.

THE JOYS OF RETAIL. A woman slipped in a puddle of water near the Hobby Lobby in Beaumont, TX and is suing HL "… for her alleged past and future medical expenses, mental anguish, pain, impairment, disfigurement and lost wages, plus all court costs," the Southeast Texas Record reported.

TECHNOLOGY. Retailers are increasing their use of scan-able bar or Q codes which enable consumers with smartphones to retrieve product info and demo videos, the New York Times reported. The Times reported Lowe's and Home Depot are now using the technology in their garden departments, with codes that lead to info on caring for plants and flowers.

WAL-MART. Topped Fortune's 500 list as the largest company in the world with revenues of $421.85 billion. Exxon Mobil was second with $354.67 billion, followed by Chevron ($196.34 billion) and ConocoPhillips ($184.97 billion).

QUOTATION. "The adjoining Hobby Lobby looks more like a ghost town with pieces of dangling metal flapping in the wind and most of the facade blasted off." -- Anna Thibodeaux, describing Tuscaloosa after the tornados (Birmingham Business Journal)

STOCKS. A.C. Moore: $2.69, up $0.01 ... Hancock: $1.08, down $0.07 Wal‑Mart: $55.72, up $0.74 ... Dow Jones: 12,595.75, down 1.7%. (Note: All changes in price are since 4/29 and are exclusive of dividends.)

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MISCELLANEOUS NEWS: RESEARCH

IMPORTS. Cargo volume at the nation's major retail container ports is forecast to level off this month at about the same numbers as last year, after nearly 18 months of year-over-year gains, and is expected to remain steady into mid-summer before resuming gains, according to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates.

OPTIMISM. A new KPMG survey of retailers' CFOs indicated half expect to see some improvement this year but only 24% expect significantly better results and only 9% expect a decline, Reuters reported.

CLOSURES. Retail store closing announcements declined 36% in the first quarter, compared to the first quarter of 2010, according to a joint report of ICSC Research and PNC Real Estate Research, Dow Jones Newswires reported.

CUSTOMER SERVICE.. American Express' new study, Global Customer Service Barometer, found "in a strong economic environment, 70% of the Americans surveyed are willing to spend an average of 13% more with companies they believe provide excellent customer service," Independent Retailer reported.

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MISCELLANEOUS NEWS

ACQUISITION OPPORTUNITY. An established scrapbook, paint, and gift products company with about $6m in sales seeks to partner with a strategic buyer. The company sells to several big-box craft retailers and is well known for its high-profile licenses and designers. For more info, email Chad Burnett at IndustryPro, cburnett@industrypro.com.

DESIGN. Therm O Web has issued a call for a Design Team.  The application form is HERE. Submit the completed form to designcontact@thermoweb.com by May 22.

CANADA. Despite the recent cancellation of the Creative Stitches and Crafting Alive shows, The Great Canadian Scrapbook Carnivals in Calgary and Edmonton will continue. as usual, sponsored by Canadian Scrapbooker magazine. The shows are Sept 23-24 in Calgary and Oct. 1-2nd in Edmonton. For info, email Katharina@canadianscrapbooker.ca or call 403.809.4888.

PAINTING. Thanks to support from Artist Expo, Decoart, and FM Brush, the National Museum of Decorative Painting unveiled its new website at www.dpmuseum.org.

DESIGN & KIDS. Check www.madebyjoel.com. In a recent article the Portland Oregonian reported Joel Henriques' site, filled with simple toy/craft products for kids and their caregivers, has 100,000+ unique visitors per month. "… this stay-at-home dad has quietly built an international following among grade-school teachers, artists, designers,  and parents looking for ways to engage little kids using stuff found around the house or the backyard," the Oregonian reported. Read the article HERE.

INTERNET. Two Peas in a Bucket was named one of the five most influential craft sites on the Internet. Read it HERE.

PEOPLE.  Industry veteran Julianna Hudgins recently completed her accredited jewelry professional courses from the Gemology Institute of America and joined Beadalon's design team to re-brand the Artistic Wire product line. She's also making monthly appearances on Jewelry Television’s JewelSchool with Margot Potter. Designers and manufacturers can email Julianna (julianna@juliannahudgins.com) to discuss designing and cross-promotion opportunities with Artistic Wire & Beadalon products. ... nterweave named Jennifer VanBenschoten as Editor of BeadingDaily.com. VanBenschoten was most recently the beading editor at About.com. She also owns her own jewelry design company, VanBeads Jewelry and Designs. BeadingDaily.com has 330,000+ community members. Interweave also named Carla Graubard as VP/Publisher of its Fiber Division, replacing John Bolton, who was promoted to Sr. VP. Graubard is a founding principal of Quantum Media, a consulting firm whose clients include many leading media companies. She will oversee the division's seven magazines, three online communities, and related video products.

KIZER & BENDER. They have written and spoken often about retailers and manufacturers needing to adjust their stores and products for an aging population. (If you missed their column on the subject, it's still in the archives. If you missed it, it's HERE.) Now the national media is paying attention. A recent report on National Public Radio quoted them. To read the report, click HERE.

KNITTING. Coming soon: "World Wide Knitting In Public Day" in Bryant Park in Manhattan June 11. More in CLN's next issue.

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THE CREATIVE NETWORK: JOB OPENINGS

To read the latest listings click on Jobs in the left-hand column or click HERE.

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THE RABBI AND THE POISON

A man goes to see the Rabbi. "Rabbi, something terrible is happening and I have to talk to you. My wife is poisoning me."

The Rabbi, very surprised by this, asks, "How can that be?"

The man pleads, "I'm telling you, I'm certain she's poisoning me, what should I do?"

The Rabbi offers, "Tell you what. Let me talk to her; I'll see what I can find out and I'll let you know."

A week later the Rabbi calls the man and says, "I spoke to her on the phone for three hours. You want my advice?"

The man said yes and the Rabbi replied, "Take the poison."

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 REMINDERS

1. If you want a hard-copy of this issue, click on "Printer Friendly version."

2. If your company is a paid subscriber, everyone in the main office is welcome to register, free. Just click on "Work for a paid subscriber? Click Here to register" (center column, near the top).

3. If you ever have trouble with your password, click on "Trouble with your password?" in the right-hand column of the main page. The computer will then email the correct information to you.

4. CLN is published the first and third Mondays of each month. Because May has five Mondays, your next issue will be Monday, June 6.

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