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Date: June 3, 2013
Vol. XVI, No. 11, #379

Printer Version

TABLE OF CONTENTS

bulletCommentary: Empty Shelves = Lower Sales
bulletNew Columns This Issue
bulletTake The CLN Poll: Rate the First Half of 2013
bulletThe CLN Poll: New Technologies' Future
bulletMichaels Numbers Drop
bulletAppeals Court Hears Hobby Lobby Case
bulletHobby Lobby & The Tornados
bulletHobby Lobby: $2 Million To Relief Effort
bulletTNNA Show Preview
bulletHGTV Loves Crafts
bulletCHA-UK Celebrates Its First Birthday
bulletHobbycraft & The Anthrax Scare
bulletEmail: Responding To The Huffington Post
bulletEmail: Against The E-Commerce Tax Bill
bulletRandom Notes, Random Thoughts
bulletMiscellaneous News: Retail
bulletMiscellaneous News
bulletThe Creative Network: Job Openings
bulletPredicting The Future
bulletReminders

COMMENTARY: EMPTY SHELVES = LOWER SALES 

Recently Barbara and I were shopping in a local Wal-Mart, and I remembered a piece by CLN about Bloomberg citing empty shelves because the company had cut back on the number of employees needed to stock the inventory. So I walked through the craft/sewing department and, sure enough, I saw some empty peghooks and shelves. Shortly afterwards, Wal-Mart announced first-quarter results that were, uh, mediocre. (Note to Wal-Mart execs: if craft/sewing sales aren't what you'd hoped, don't blame the vendors if you can't keep the shelves stocked.)

The clerk at our check-out line overheard me telling this to Barbara and said under her breath, "They're shooting themselves in the foot."

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NEW COLUMNS THIS ISSUE

Business-Wise. Interview with Sue Turchick, CHA's Membership VP, on CHA's efforts to create sections and chapters. Learn how and why participating in these groups can help your business.

Kizer & Bender. "Visual Merchandising II," specific insights from retail experts on how to display your products to maximize your sales per square foot.

(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: RATE THE FIRST HALF OF 2013

We're just about done with half the year, so it's time to get your grade book out again. How would you grade how your business has done the first half of 2013. A? B? C? D? Hopefully not F! To vote, click on Industry Polls in the right-hand column or click HERE.

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THE CLN POLL: NEW TECHNOLOGIES' FUTURE

Apparently CLN asked a very obvious question when it queried readers about how long it would take for 3D printers and the 3Dabbler and Color Point pens to affect our industry. Everyone said it would happen within five years.

Think you've heard the most bizarre thing, like functional weapons, made by a 3D printer? How about this: making food. NASA gave a grant to a research company after a researcher made chocolate for his wife. "Printing" food would be a way to feed astronauts on a years-long journey to Mars. Read about making pizza HERE.

And how about this: Clone Factory in Japan will use a 3D printer to print your face and put it on a doll's body, the Huffington Post reports. Read it HERE.

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MICHAELS' NUMBERS DROP

For the first quarter ended May 4, same-store sales slipped 0.7% due to a 3.0% decrease in transactions, partly offset by a positive 1.7% impact from a higher average ticket and a positive 0.6% impact in deferred custom framing revenue. Custom framing and yarn had the strongest sales increases.

Net sales increased 1.5% to $993 million, but gross profit decreased 1.2% to $407 million, and gross margin decreased 110 basis points to 41.0%. Operating income dropped 12.2% to $130 million, and as a percent of net sales decreased 200 basis points to 13.1%.

Net income declined 11.3% to $47 million, and as a percent of net sales decreased 60 basis points to 4.8%.

Michaels ended the quarter with $55 million in cash, $3.09 billion in debt, and approximately $406 million available under its credit line. Inventory at quarter's end was $842 million. Average Michaels store inventory, inclusive of distribution centers, was $723,000, down 8.0% from last year's.

In the past year, the company opened 51 Michaels stores. In the past quarter, the company opened 15 Michaels stores, relocated four, and closed one; three Aaron Brothers stores were closed.

There was a conference call discussing the results, but due to the quiet period associated with Michaels' previously announced intention to file an initial public stock offering (IPO), there was no question/answer session. A recording of the call, and the complete quarterly report, are available at www.michaels.com.

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APPEALS COURT HEARS HOBBY LOBBY CASE

On May 23rd the full 10th U.S. Circuit Court of Appeals in Denver heard the case of Hobby Lobby's refusal to provide the morning-after pill for employees, as mandated by the Affordable Health Care Act.

Hobby Lobby argues that businesses, not just currently exempted religious groups, should be allowed to seek exception from that part of the health care law if it violates their religious beliefs.

"The Greens are a deeply religious family who have exercised their faith through their business for 40 years," Kyle Duncan, an attorney for The Becket Fund for Religious Liberty, told the court. He said they believe they should be granted the same religious liberties as individuals, whether they run a business or a nonprofit.

Attorneys for the U.S. Department of Justice compared the argument to a taxpayer refusing to pay taxes because some portion of the taxes would fund a program that he opposes, and HL would be, in effect imposing on employees the religious beliefs of the Green family.

Each side was given 30 minutes to present its argument, and justices frequently interrupted the lawyers with questions, the Denver Post reported.  

To date, at least 31 lawsuits have been filed by businesses against the requirement, but HL's case is the first challenge involving a large for-profit business to reach the appeals court level.

The court did not indicate when it would announce its decision. Regardless of how the court rules, it is expected it will be appealed to the U.S. Supreme Court.

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HOBBY LOBBY & THE TORNADOS

The Hobby Lobby facilities are 10-15 miles from Moore, the scene of the worst of the tornado, and so it is unaffected and capable of receiving shipments as usual. Considering the company employs almost 4,000 people in the area, as of press time an unknown number lost their homes.

(Note: The tornados that hit the Oklahoma City area this past Friday hit mostly rural areas.)

HL has received numerous emails and calls offering assistance, including monetary assistance, from vendors and others.

Another tragedy, another effort by Brea Bead Works to help: "Our store has decided to accept donations for the Red Cross to give our support to the community of Moore, OK," said Scott Remmers, who operates the store with his wife, Wendy, in Brea, CA. "We are calling our efforts 'Bead Moore' and hope to have as many bead stores take part. Since this is very quick, we have told stores to do their own thing, but we are going to give a $5 Bead Buck for anyone who donates $5 or more to the Red Cross. The bead buck can be used in the month of June." 

Scott, who is head of the new CHA Bead Section, had a similar project for the people of Newtown, CT.

HL's Randy Green told CLN, "The amount of care and outpouring of people and organizations wanting to help the victims of this disaster is as amazing as the disaster itself!"

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HOBBY LOBBY: $2 MILLION TO RELIEF EFFORT

Hobby Lobby is donating $1 million to Central Oklahoma Habitat for Humanity – many Habitat homes were destroyed by the storm -- and $1 million to the American Red Cross to assist storm victims. The company also plans to provide its own construction team to help Central Oklahoma Habitat build a home for one of the families.

"Our thoughts and prayers go out to all of the families affected by the tornadoes that destroyed parts of our state," CEO David Green said. "We know that their hearts are hurting, but we also know that God is with them, and we hope that these contributions will aid in helping them rebuild their homes and begin the healing process. We know that through Him, all things are possible."

"It is no surprise that Hobby Lobby is stepping forward with this more than generous gift and accepting the challenge to support the long-term tornado relief effort," Ann Felton Gilliland, Chair/CEO of Central Oklahoma Habitat for Humanity told The Oklahoman. "This money will provide safe, affordable housing for many Oklahomans who lost their homes. We know how much a home means to a family, and we feel truly blessed to receive this gift."

"With the help of caring individuals like the Green family, the people of Oklahoma will be able to rebuild their neighborhoods and restore the community, and we could not feel more blessed to accept this donation on their behalf," added Jake Peters, Chief Development Officer with Red Cross Central and Western Oklahoma.

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TNNA SHOW PREVIEW

Highlights for the TNNA show, "Hooray for Needlearts!," June 22-24 in Columbus, OH:

1. There are 25 new exhibitors and by CLN's deadline 10 classes have sold out. Preregistration ends June 12.

2. The Retailer Lunch featuring Retail Expert Bob Negan is close to record attendance.  

3. The Friday evening "Special Premiere" event includes Cat Bordhi with a special spinning demo and unique designer fashions showcasing the newest fall and winter yarns from the top yarn companies.

4. Saturday begins with a special "Opening Act," followed by the show and ending with an award presentation featuring the 2013 TEN Award recipient announcement and the Business Innovations award winners. The preliminary 2013 Industry Survey Results will also be shared by India Hart Wood of Hart Business Research.

5. The show has Guidebook, its own app. It will soon be available for download for smartphones and tablets at www.tnna.org/?gomobile. It includes a class schedule, exhibit hall floor plan, a listing of area restaurants, etc.

6. The charging stations at the TNNA Lounge will feature connectors for a variety of common phone, tablet, and laptop types.

For more show details and to register, visit www.tnna.org.

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HGTV LOVES CRAFTS

Excerpts from the Editor's column in the June issue of HGTV magazine: "I'd choose a crafts room over a walk-in closet any day. And I'd rather shop for paper punches, ribbon, fabric paint, and scrapbooking stickers than shoes." Sara Peterson ends her column with, "A good crafts stash should never stop growing."

The issue also includes a two-page spread, "The Sparkliest, Handiest, Cutest Craft Stuff Ever!" The article highlights 16 items, including Jacquard Textile Color, Plaid Folk Art paint and Mod Podge, Recollections' scrapbook paper and Bling On A Roll, Golden Taklon brushes, Surebonder Ultra mini glue gun,  X-Acto Designer Series craft knife, Olfa cutting mat, Martha Stewart fine glitter, EK Success layering punch, Paper Source rubber stamps and Color Box pigment ink pad.

(Comment: It is not clear how the magazine decided which products were the "best." The only explanation was, "We asked crafting pros for their DIY must-haves. The result: the ultimate supply stash.")

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CHA-UK CELEBRATES ITS FIRST BIRTHDAY

"Our first year has proved more successful than we could ever have hoped," says Sara Davies, Board Chair of CHA-UK, the Great Britain arm of CHA. "We've worked hard to organize events and seminars that will target both retailers and manufacturers and help boost the craft industry."
Since its conception, CHA-UK has hosted seminar sessions at the Autumn Fair in 2012 and at the Stitches trade fair in February, as well as networking evenings at both shows and a number of successful retailer training events around the country. The Association successfully arranged for eight companies to attend the CHA Conference & Trade Show in Anaheim and hosted an international reception, which was attended by 150 international buyers.

"For so long the craft industry has lacked a proper trade association to bring retailers, designers, distributors and manufacturers together," Sara concluded. "This is the aim of CHA-UK and I feel that we're really starting to achieve this."
Research indicates there are 26+ million women crafting in the UK. For more info, visit www.cha-uk.co.uk.

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HOBBYCRAFT & THE ANTHRAX SCARE

Last month seven workers at a U.K. Hobby Craft distribution center opened a crate from overseas and white powder landed on their clothes. Fearing that it might be anthrax, the employees went to the emergency room of the local hospital.

Hospital workers were also afraid it was anthrax. Pandemonium ensued. "Everyone assumed the worst and someone said it looked like anthrax. Panic spread like wildfire and the whole place was put into lockdown," a hospital worker told The Sun.

The emergency room remained in lockdown for three hours while the powder was tested.

Turns out it was a "low hazard material" containing napthalene -- which was used to fumigate overseas containers.

After the incident, a Hobbycraft spokesperson told the Burton Mail, "Despite this being an isolated incident and the substance being declared non-hazardous, we appreciate that it may have caused the colleagues involved some concern, and so are reviewing our procedures to ensure that such incidents do not occur in future."

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EMAIL: RESPONDING TO THE HUFFINGTON POST

Note: In the previous issue, CLN reported on a condescending criticism of numerous crafts, particularly scrapbooking, by Brie Dyas. Her article, "8 Crafts That'll Never Be Cool, Ever: Scrapbooking, Plastic Canvas, Rock Painting & More," included this: "But there are some crafts that can never make the transition from genuine activity to ironic statement to socially acceptable practice. For example: scrapbooking. Like, I can't imagine telling someone that I spent the evening scrapbooking, without it sounding sad. Even if my scrapbooks were irreverent and awesome. The activity itself is just nerdy."

She thinks knitting is okay, because "I saw it in real life, at a genuinely cool bar, being practiced by genuinely cool people."

That inspired a CLN reader to respond:

"Although it is her opinion and cleverly written, I find it troubling to hear someone put down the vast percentage of crafters -- scrapbookers, rock painters, and others -- who want and need nothing more than to be creative and have fun.

"What would make knitting at a bar cooler than other crafting? Is the consumption of alcohol and knitting while YOUNG the reason it gets Brie's thumbs up? We who knit at home in rockers and recliners (yes, I do and I've done so since I was 12!), at friends' homes, yarn gatherings, and other venues are precisely as cool as those who choose wine and stilettos for their adventures in yarn.

"Regardless of the craft or the setting, some activities become lifelong passions (those who drink at the local pub while they're knitting eventually knit while sitting at their kids' soccer games) -- while some activities don't hold our fancy. But who says scrapbooking, painting on rocks, and experimenting with Perler Beads isn't cool? Knocking it without exploring where it could lead is ridiculous!

"The instant a celebrity embraces something it will suddenly become the latest trend. (Wasn't that Brad Pitt I saw sitting on the beach in Anguilla painting shells? No? Oh, that's right, it was my godson's little boy at the Jersey Shore!)

"And what would make a vintage Victorian scrapbook filled with carefully cut decoupage scrap 'okay,' but an album made with today's equivalent supplies not as wonderful? I'd bet the farm that Victorian ladies would have quickly traded their corsets and tiny scissors for a die-cutting machine and a crop at an air-conditioned hotel!" – Name Withheld

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EMAIL: AGAINST THE E-COMMERCE TAX BILL

I see both sides of the Marketplace Fairness Act, but the comment about it not being difficult to implement for on-line retailers isn’t true. Yes, I have heard that the states are going to have to develop software for the retailers to use. However, that will mean 50 different programs to implement and it will be the retailer's problem to integrate all these programs to work with the internal computer sales programs. Then there is the ongoing need to constantly implement changes every time an individual taxing authority within a state (city, borough, county, state or any other taxing levels) changes the percentage they want to charge. This truly is a nightmare in the making for these businesses.

And, if fairness is the issue (which we know isn’t the real issue -- the real reason is new money for the states to spend), then I would think that brick and mortar stores should have to collect taxes on purchases made in their stores by people who live in another state. – Name Withheld

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RANDOM NOTES, RANDOM THOUGHTS

1. I can't remember the last time Michaels had a quarterly report with so many mildly negative numbers. I don't know anything about when is the best time to do an IPO, but I assume this report will cause the company to postpone it, again, despite the surging stock market. Dallas Morning News columnist Maria Halkias agrees: "Michaels is in early stages of setting itself up for an initial public offering of stock. That may be a tough sell as net income fell 11.3% to $47 million."

2. Toys "R" Us is probably going to abandon its iconic, 110,000 sq.-ft. store in Times Square in New York, Commercial Observer reported. Why? Oh, maybe because the landlord, Cushman & Wakefield, is raising the rent by $38 million.

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MISCELLANEOUS NEWS: RETAIL

SHOWS. To see the complete schedule for CHA's Create & Connect Summer Conference & Trade Show in Las Vegas, visit HERE.

WEBINARS. CHA is sponsoring "Exhibiting Made Easy: How To Simplify the Experience and Maximize Your Investment" with CHA's Registration Manager, Andria LaJeunesse, Wed., June 12, 1:00 – 2:00 pm EST. It's free. Register HERE. … "Illustrator: Making Designs To Sell" (working with Adobe Illustrator) with writer/photographer Helen Bradley, June 19, 1:00 – 2:00 pm EST. $15 for members, $25 for non-members. Register HERE.

KIDS. A.C. Moore launches its kids summer program June 26 and held every Wednesday afternoon through Aug. 14. The first project will be a tote bag project to benefit Alex's Lemonade Stand Foundation for Childhood Cancer (www.AlexsLemonade.org). Consumers can buy a canvas tote bag for $1, which kids then decorate. Shoppers can also donate to the foundation via the purchase of paper "lemons" at checkout.

CRIME. The seventh time an employee stole money from the Wal-Mart in Rock Hill, SC, the manager had her arrested. When she was arrested, police found marijuana in her purse. (Comment: Why didn't the manager call the police the first time?)

CRIME. A suspect used counterfeit checks to pay for items at the Hobby Lobby in Chattanooga, TN. He is considered part of a ring passing counterfeit checks in at least eight states. … A county judge was standing in the checkout line of the Hobby Lobby in Murfreesboro, TN when a man approached him and asked if he was a judge. When the judge said yes, the man kicked him and ran. He was later identified and arrested. The judge had previously ruled against the culprit, who was a bus driver for the local Boys and Girls Club.

COURT CASE, I. A judge in Delaware ordered attorneys for Wal-Mart to turn over more information to shareholders seeking records on how the company responded to allegations of bribery involving its operations in Mexico, the Huffington Post reported. The judge said Wal-Mart had taken a "persnickety and narrow" approach to providing documents requested by attorneys for large pension funds trying to find out what, and when, company directors knew of the payments. The shareholders claim company officials breached their fiduciary duties by allowing and covering up the alleged payments, which spurred federal bribery investigations in the U.S. and Mexico.

COURT CASE, II. Wal-Mart pled guilty to misdemeanor counts of negligently dumping hazardous waste in California. As part of the deal, the company will pay $81million to settle the case and a similar one in Missouri.

NEW STORES. Next year Hobby Lobby will open in Albany, the company's first in Oregon, and one in Waukesha, WI and Lehigh Valley, PA. HL is also looking for a location in Gainesville, FL. … Jo-Ann opened in Hendersonville, NC.

HONOR. In a readers' poll, the framing department at the Hobby Lobby in Maury County, TN was named the best framing department in the area for the seventh year in a row.

SIGN OF THE TIMES? Luxury retailer Neiman Marcus will close down its Chinese operations, Inside Retail.Asia reported. The company will close its warehouse in China and all sales through the online store will be fulfilled by its website in the U.S. The company said the closure had more to do with Neiman's change in business model rather than the market conditions.

RECOMMENDED READING. "Death of the Salesmen: Technology's Threat to Retail Jobs," by Derek Thompson in The Atlantic. "Twenty years ago, the shoppers went to the stores. Today, the stores go to the shoppers," Thompson wrote. "From the floor salespeople replaced by informative Web sites to the cashiers nudged aside by automatic checkout machines, the daily tasks once performed by store employees are either being taken over by machines or outsourced to customers." Read it HERE.

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MISCELLANEOUS NEWS

PEOPLE. Industry veteran Frank Rizzo was named President/CEO of The McCall Pattern Co., replacing Robin Davies who retired from McCall after 34 years. Frank had previously served as President/CEO of Simplicity Pattern Co. where he worked for a total of 25 years.

HONORS. Ernst & Young named Stacey Caron of Spellbinders Paper Arts as a finalist in the company's Entrepreneur of the Year® program in the Desert mountain region (CO, AZ, NM).

MEDIA. The summer issue of Bella Crafts Quarterly is now available at http://bellacraftsquarterly.com/current-issue. ... Alexa Westerfield has a funny blog post on iLoveToCreate, "Are You The Ultimate Craft Horder?" Take the quiz HERE.

BEST WISHES. To Richard Goodban, who is retiring from ColArt after 36 years with the company. He remains on NAMTA's Exec Board as Past President.

SHOWS. The education proposal form for the 2014 TNNA San Diego and Nashville shows is now available on the website. The deadline is July 21.

QUILTS. The recent International Quilt Festival in Cincinnati drew 15,942 attendees, Quilts, Inc. reported. The company also announced that the Festival in Long Beach Aug. 2-4 will be the last show held in that city.

SHOWS. Quilts, Inc., producers of the Quilt Markets and Festivals, announced a new show, Quilt! Knit! Stitch!, Aug. 14-16 2014 in Portland. The company claims what makes the show unique is that it will have a greater emphasis on needlearts such as knitting, embroidery, crochet, cross-stitch, tatting, and sewing.

PAINTING. To see photos of all semi-finalist and winning entries in Pampered Palette's juried show, click HERE.

RECOMMENDED READING. "The Smart Traveler's Guide To Preventing Identity Theft." Read it HERE.

TECHNOLOGY. Now the International Space Station is getting a 3D printer. Read about it HERE.

QUOTATION. "Those who say 'There's no such thing as a stupid question' have never worked in customer service." -- Unknown

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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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PREDICTING THE FUTURE

I'm compiling material for an article, "Key Dates in Industry History," and I dug out the December, 1984 issue of Profitable Craft Merchandising. It was the magazine's 20th anniversary and to celebrate, it published a history of the industry. Also included in the issue, however, was another article, "The Next 20 Years," predicting what the typical craft store would look like in 2004.

Some of it was pretty accurate, but here's one excerpt: "Computers are likely to be friendly companions in the 21st century, a cost-justified investment for even the smallest mom 'n pop stores."

Gee, ya think?

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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. Your next issue will be Monday, June 17.

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