Date: April 4, 2005
Vol. IX, No. 7

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TABLE OF CONTENTS

COMMENTARY: Thought Provoking, not Definitive 

The last issue of CLN generated more comments on more subjects than any previous issue. My favorite comment, published below, is from Larry Olliges who said the issue provided "lots of food for thought."

That's really all I'm trying to do: give you food for thought about your business and your industry. And not just by ranting and raving on my own, but by publishing thoughtful comments from readers in every corner of the industry. You'll find lots of those comments in this issue and in the columns. (And I hope they will inspire you to add your thoughts to the discussions.)

On the other hand, a well meaning subscriber said CLN was the "Bible" of the industry. Uh oh. I'm not near smart enough, or blessed enough, for CLN to be considered THE word on the industry. After all, Matthew, Mark, Luke, and Hartnett doesn't sound right to me.

Business-Wise. Thoughtful responses on the decline of the "Smiling Bunny Syndrome" that has dominated craft design for decades.

Designing Perspectives. Advice on how designers can cope with the changing nature of our industry and its design trends.

Memory Paper & Stamp. Retailer Lisa Kanak on how to increase the size of the scrapbook pie.

Kate's Collage. An excerpt from a wonderful new book, Craft To Heal: Soothing Your Soul with Sewing, Painting, and Other Pastimes.

Scene & Heard. A report on a very disappointing trade show sponsored by the Home Sewing Assn. in Las Vegas.

Tech Topics. How do we attract the techno-savvy younger generation to crafts? Some thoughtful comments.

Note. If you surf to a column and it's an "old" column, click the "Refresh" or "Reload" button of your browser.

Retailers: Is consumer interest up, down, or hard to gauge because so many retailers are dividing the pie?

Vendors: Are your sales to independents up or down due to more/fewer independents ordering or gaining/losing market share to competitors?

To vote, click on Industry Polls in the right-hand column, or click HERE.

Retailers. 57.1% plan to attend the CHA Summer Show (Chicago, July), while 38% will not attend and 4.8% are undecided. 65% plan to attend Memory Trends (Las Vegas, Oct.) while 25% will stay away and 10% are undecided. 76.2% plan to attend the CHA Winter Show (Las Vegas, Feb.), while 4.8% will not and 19% have not decided.

Vendors. 64.3% will exhibit at the CHA Summer Show; 33.3% will not and 2.4% remain undecided. 53.9% will exhibit at Memory Trends; 33.3% will not and 12.8% are undecided. 90% will exhibit at the CHA Winter Show; 2.5% will not and 7.5% are undecided.

For more info: www.chasummershow.com ... www.memorytrends.com ... www.chashow.org.

The good news: Thanks to Michaels, CLN's Retail Index outperformed the Dow in the first quarter of 2005; the bad news: almost everyone else was negative. CLN's Retail Index slipped 0.4% in the first quarter, while the Dow dropped -2.6%. The members of the CLN Index: Michaels, +21.2% ... Jo-Ann's, +2.1% ... Wal-Mart, -5.0% ... A.C. Moore, -7.1% ... Hancock, -28.4%. (Rag Shops is no longer a publicly traded company.)

Martha Stewart may have caused a stir with her poncho, but her company's stock fell 22.2%. Industry publisher Primedia had its best quarter in recent memory, rising 15.1%, while Meredith, another public publisher with industry related magazines, fell 13.8%. Target was down 3.6%, but once again outperformed Wal-Mart.

USA Today used data from the new research study by the Craft Yarn Council of America as its "Snapshot" on the front page of the Life section of its 3/28 issue. The 3/30 issue of the New York Times also referred to the study. Among the highlights of the survey:

1. Women ages 25-34 account for 33% of the 53 million American women who know how to knit or crochet. The size of that age group increased more than 150% since 2002.

2. Yarn purchasers made an average of 15.3 projects last year, unchanged from 2002, so the sales growth is coming from attracting consumers new to knitting and crochet.

3. The majority of yarn consumers, 37%, spend $4-$7 per skein; 35% spend $2-$4/skein; 11% spend $7-$10/skein.

4. Throws remain the most popular project (53% of yarn consumers), followed by baby blankets (42%), scarves (36%), hats/gloves, 13%.

Wal-Mart's former vice chair Thomas Coughlin resigned as a director due to a company investigation into unauthorized use of corporate gift cards and personal reimbursements that has also been reported to federal prosecutors, Reuters reported. Coughlin joined Wal-Mart in 1978 and had once been President/CEO of the company's stores division.

Wal-Mart also reported to the Securities and Exchange Commission that the money involved ranged from $100,000 to $500,000, and the company had also fired three employees, include a vice president. The employees were not named.

"The investigation relates to personal reimbursements, payment of third-party invoices, and the use of company gift cards," Wal-Mart said in a statement. "There will be no adverse financial impact to the company in connection with this matter."

In December Wal-Mart had announced Coughlin's retirement as vice chair, but that he would remain on the board until the annual shareholder meeting in June.

In February, Bentonville announced it was naming its new public library after Coughlin; the Walton Family Foundation and Wal-Mart Sam's Club Foundation had donated $4 million to the project. When Coughlin resigned as vice chair he had agreed to a strict clause forbidding him from speaking to any employees of competitors (e.g. Target) in order for him to remain eligible for various stock options and bonuses. No word on the library name or the stock options.

(Comment: Hard to believe Coughlin would be stealing from the company. Since Dec. 30, Coughlin has directly or indirectly sold 712,855 shares of Wal-Mart stock for $21,783, 256, according to Vickers Stock Research Corp.)

F+W Publications is for sale for $550 million - $650 million, the Wall Street Journal reported. F+W publishes a variety of industry-related books and magazines, including Memory Makers; a couple of years ago F+W bought Krause Publications, which publishes CNA.

F+W's chair, Bill Reilly, paid $130 million for F+W in March, 2002, according to American City Business Journals, and later bought Krause Publications. Reilly is a co-founder and former CEO of Primedia, which publishes Creating Keepsakes, Craftrends, and other industry publications. He is the only person in industry history who has owned both trade magazines, Craftrends and CNA, although not at the same time. Meredith, also a publisher of industry related magazines, is a potential buyer, the Wall Street Journal reported. The Wall Street Journal cited sources predicting F+W could fetch 11-13 times its 2004 earnings before interest, taxes, depreciation and amortization, which were $50 million. Last year, F+W's revenue was about $260 million, the Wall Street Journal reported.

Here's a sign of the times. One of the most well known companies in our industry is moving all its manufacturing to China. You can imagine the effect on the U.S. employees' morale. What you might not imagine, though, is what one employee did about it.

To save money, the company, says one employee, "no longer prints catalog sheets or sales materials, instead placing them on CD-ROM. But that wasn't as perfect a solution as they hoped.

"A begrudged employee inserted his own thoughts about the situation on the 2005 Catalog Sheets disc handed out at CHA. (To hear the comments, one must turn up the volume, insert the CD, and hold down the ALT and SHIFT keys until the loading message disappears.)

Nothing vulgar or crude mind you, just a little auditory message .... Even though the company had no idea the message was on the CD, the [employee] was let go anyway right after CHA."

MICHAELS. reported its same-store sales for the first quarter are tracking ahead of plan and execs now expect same-store sales to rise 5% - 7%, rather than the initial prediction of 3% - 5%. That should result in diluted earnings/share for the quarter to increase 29% - 38% to $0.27 - $0.29. CEO/President Michael Rouleau attributed the improvement to increased customer traffic and higher transactions. He said the top departments are yarn, scrapbooking, general crafts, and kid's crafts and the top regions are the Pacific, Southeast, and Central zones.

STOCK. After the Michaels announcement, Southwest Securities raised Michaels to Strong Buy and BB&T Capital Markets upgraded Michaels to Buy.

TARGET. Has expanded its scrapbooking offerings, at least in the larger stores. A recent thread on the Two Peas message board was filled with excited scrappers planning to rush out to their local Target.

MERGERS. The Kmart/Sears deal is complete: the Sears Holding Corp. Board Chair Edward Lampert says 400 Kmarts will be converted to the new mid-sized Sears Essential concept, but there won't be numerous store closings, the Associated Press reported. But there will be cuts in wages and benefits, the Detroit Free Press reported. Three days later the company announced 250 layoffs at the headquarters.

DUCKWALL-ALCO. Named Bruce Dale as President/CEO. Dale was briefly the head of the now defunct Frank's Nursery, and before that worked for Michaels for 10 years, eight of them as president of the Aaron Bros. division.

GARDEN RIDGE. The bankruptcy court approved the disclosure statement, so creditors will receive the disclosure statement, reorganization plan, and ballots this month ... Reported a 6% increase in February same-store sales and an 8-point increase in product gross margin.

DOLLAR STORES. According to the consulting firm, Retail Forward, dollar stores had 15,000+ outlets in 2003, with 8,000 more projected to open by 2008. Among the best selling items are party goods, toys, stationery, and candles. This type of store has grown, in part, because it's attracting middle-class consumers who can't pass up a bargain, not just lower-income consumers, Retail Forward stated.

QUOTATION. "In a real sense, retailers are abdicating their responsibility when they rely too heavily on manufacturers to figure out consumers and come up with new ways to meet their needs. In the end, that’s what the retailing business is all about." – Jeffrey Woldt, Mass Market Retailers (3/7/05 edition)

QUOTATION. "Michaels will never have a 'perfect store' until they improve their relationships with their vendors." – Industry manufacturer

Recently CLN exchanged emails with Charlotte Roby, who owns Roby's Photo Shop and Scrapbook store, a one-hour digital lab/scrapbook store in Damascus, MD that also offers photo restorations and custom framing. We told Charlotte we were concerned about online scrapbooks which enable consumers to "scrap" completely online without spending a penny on the industry's scrapbook supplies.

Charlotte's answer: "The only reason I don't think that digital scrapbooks online will last is because our technology keeps changing. Remember floppy disks? It is only a matter of time before we are on to the next storage thing. Also, remember how everyone said online books were going to replace regular ones? Nothing will ever replace the feeling of a book on your lap as you sit with your child or parent, going over memories!" (To learn about Charlotte's operation, visit www.robysphotoshop.com.)

On the other hand, consumers can put their scrapbook online so they can share it with friends and relatives around the world, something they can't do with a "hard-copy" scrapbook.

So, will online scrapbooks hurt our industry? Or encourage consumers to make both types, and therefore ultimately help our industry? Email your thoughts to mike@clnonline.com.

Wow! Way too much info in this week's newsletter. Lots of food for thought.

I think we are obviously in an era for change in this industry, and we certainly have to figure out how to attract the 30-and-under crowd.

I think part of the reason knitting is so popular, especially knitting scarves and hats (the young knitters like to knit hats), is the fact they have lots of yarn to choose from, but they do not need a pattern. Once they learn to knit, they can just do their own thing. One of the new yarn shops in Louisville is owned by a young couple and is in a neighborhood that caters to the young 16 to 30 year old crowd.

Us old craft people have got to accept change or we will not survive until the next generation. This is not the craft industry of the 1980's or 1990's; I'm not even sure it is the industry of last year. – Larry Olliges, Dee's Crafts, Louisville, KY.

1. My cable company doesn't provide the Style Network, so I haven't seen the new series, Craft Corner Deathmatch. But judging from reports from CLN subscribers, it sounds unrelentingly stupid and insulting to true crafters. And does the show have to end with a host saying, "Remember, it's cheaper and easier to just buy stuff"?

2. A quick look at CLN's subscriber list would eliminate any doubt that our industry is truly international. CLN is now read by subscribers in 19 countries on six continents.

HEALTH CARE. The U.S. House Education and Workforce Committee passed the Small Business Health Fairness Act (HR 525) which would enable small businesses to purchase health insurance through trade associations. The bill has 115 House sponsors from both sides of the aisle, and President Bush said he's in favor of it, but it is expected to face a tough fight in the Senate. To learn more, visit www.ahpsnow.com.

TAXES. Refund season may not be as good for retailers as once thought. Almost 148 million taxpayers expect a refund this season, but 49% plan to use the money to pay down debt and 39% hope to put at least some of it in savings, according to new research by the National Retail Federation. A previous NRF study indicated consumers spent almost $1 billion less this Easter, which was the earliest (and therefore coldest) Easter in 15 years.

LAW. By a 5-3 vote, the U.S. Supreme Court has held that age bias against workers over 40 is illegal under the Age Discrimination in Employment Act, even if it is unintentional.

CHA SUMMER SHOW. It's July 15-17, with education starting the 14th. It will feature 580+ exhibitors in 1,400+ booths. Educational highlights include Susan Inglis on the key elements of marketing and use of the media, Retail Doctor Bob Phibbs on overcoming the competition, Mark Mayberry on attracting top-notch employees, and buying and selling on eBay. There will also be at least 10 mega-workshops and 61 technique classes. CHA members will receive the Buyer Registration Kit later this month. Visit www.chasummershow.com.

PAPER. Paperworld USA, the new show sponsored by SHOPA and the sponsors of the huge paper shows in Germany and Spain, will be Nov. 9-11 in Las Vegas. visit www.paperworld-usa.com.

NEEDLEWORK. The Buyer Brochure for the NeedleArts Market in Columbus June 11-13 has been mailed, and online registration is available for members of TNNA or INRG. Visit www.tnna.org or www.inrg.org or call 800-889-8662. (Comment: Judging from recent TNNA shows and the knitting/crochet trend, look for this show to break more attendance records.)

TOY SHOWS. The American Int. Fall Toy Show, Oct. 24-27, and the American Int. Toy Fair, Feb. 12-15, 2006. Both in New York. Visit www.toy-tia.org.

NEWS: BOOKS AND MAGAZINES

1. DRG Publishing launched CardMaker magazine, a bi-monthly filled with how-to's for making greeting cards, invitations, tags, and more. Vicki Blizzard is exec editor. It will be sold in stores and by subscription ($19.97/year). Visit www.cardmakermagazine.com.

2. Coming soon: Live. Learn. Lead To Make a Difference and The Wal-Mart Way: The Inside Story of the Success of the World's Largest Company, by Don Soderquist, former vp of Wal-Mart (who gave a fascinating keynote speech a few years ago at the HIA show).

3. The American Society of Magazine Editors awarded ReadyMade magazine a "General Excellence" nomination for its National Magazine Awards. Launched in December 2001, ReadyMade is a "a bi-monthly magazine for people who like to make stuff" and is owned in part by Interweave Press. Visit www.readymademag.com.

4. It's official. F+W has pulled the plug on its new magazine, PaperArts.

5. TheBookStandard.com listed the top selling craft books as of Mar. 20: #1 Stitch 'N Bitch: The Knitter's Handbook, by Debbie Stoller (Workman Publishing); #2 Knitting for Dummies, by Pam Allen (Wiley); and #3 Stitch 'N Bitch Nation by Debbie Stoller (Workman).

6. Interweave Press was named the fifth fastest-growing independent book publisher in the country by Publishers Weekly. "The American public’s increased interest in crafts has been the catalyst behind the explosive growth at Interweave Press over the past three years," PW reported. Between 2002–2004, Interweave increased net sales in its book division by 80%. Interweave publishes 20-25 craft books annually, as well as magazines such as Interweave Knits, Beadwork, PieceWork, Spin-Off, Handwoven, and Fiberarts. Some of Interweave's best sellers in the last three years have been knitting and crochet books, with many backlist titles selling more copies in 2004 than when they were first released. The Knitter’s Companion by Vickie Square was first published in 1996 and sold a record 35,000 copies last year. Craft and specialty stores account for about 46% of the company’s sales. For info, visit www.interweave.com.

FOR SALE/MERGER. Craft, cross stitch, needlework and accessory company (in business for 25+ years) seeking a merger or sale. Company imports majority of its products and distributes to such accounts as Wal-Mart, Jo-Ann’s, A.C. Moore, Michaels, Hobby Lobby, Hancock; also sells to major craft distributors who sell to independents and specialty retailers throughout the world. Excellent listings and relationships providing tremendous opportunity for growth. For more info, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

PEOPLE. Richard Brown resigned as sales/marketing VP for Spinrite and as chair of the Craft Yarn Council of America. Coats North America President John Laurie assumes the CYCA chair.

LOOKING TO HIRE. Ellison Educational Equipment is looking for a National Sales Director. Need not relocate; up to 80% travel. Email resumes to humanresources@ellison.com ... Major manufacturer looking for an aggressive Sales Manager. For details, call Mike Hartnett in confidence at 309-925-5593 or email mike@clnonline.com.

MARTHA'S PONCHO. The download # for the poncho pattern on Lion Brand Yarn's site has now passed 350,000 ... Interweave Press and Coats & Clark have The Freedom Poncho at www.coatsandclark.com and www.interweave.com. This version was designed/interpreted by Lily Chin, the official "World's Fastest Crocheter." She appeared and showed the pattern on the CBS Early Show.

INTERNET. The Craft & Hobby Assn. has upgraded/revamped its website. Visit www.craftandhobby.org to see all of the new features.

INTERNET. ScrapFriends.us, an educational and informational scrapbooking and paper craft site, is looking for additional Review Team members. To learn more, visit www.scrapfriends.us/review_team_call.html.

RECALL. Rose Art is voluntarily recalling its face-painting line, Design A Face Make-Up, according to the Consumer Product Safety Commission and the Food and Drug Administration. Rose Art received complaints that 200+ children experienced minor adverse reactions. No reactions lasted more than a few days. For info, call 800-272-9667, visit www.fda.gov/opscom/backgrounders/complain.html, or email info@roseart.com.

PAINTING. The Society of Decorative Painters has a new program, the Junior Artist Club, for kids ages 7 and up. May 28 will be Kids Day at the Annual Conference/Expo in Tampa with free admission for attendees 15 years and under – plus free make-it/take-its, giveaways and group art projects. For more on Kids Day, call Teri Mott at 316-269-9300, ext. 115 or email teri@decorativepainters.org.

MEMORY. To read a fascinating discussion about scrapbooking by professional graphic designers, visit www.designobserver.com/archives/000883.html.

BEADS. The second series of Beads, Baubles & Jewels uplinks with PBS stations on May 11. Sponsors include Bead & Button magazine, Fire Mountain Gems and Beads, BeadStyle magazine, Beadalon, Westrim, Blue Moon Beads, and Pure Allure. According to a very positive article in the Cleveland Plain Dealer on jewelrymaking's growth, the first series is already airing on 61 stations.

QUOTATION. "I saw the mention of the Bob Ross T-shirts in your current issue. I had to buy a 'happy clouds' shirt as soon as I saw it; Bob Ross was part of my growing up years. Without him, Thomas Kinkade would not be where he is today – same style, different marketing." – PC Smart

BUSINESS PROFILE: HOUSTON ART

Houston Art is celebrating its 40th year in the arts and crafts industry. On Nov. 22, 1965, Houston Art opened its doors as a manufacturer and distributor of art and craft supplies. Founder Jim Mulvey started the Mona Lisa brand of artist materials in 1968, and the brand continues to flourish today with products such as Mona Lisa Gold Leaf and Pink Soap.

Jim was later posthumously awarded one of the Craft & Hobby Assn.'s highest awards for being a true pioneer of the industry.

Since incorporating in 1965, Houston Art has witnessed many changes in the industry and has adapted to those changes in order to succeed in today's marketplace. Houston Art is no longer a wholesale distributor of art and craft products.

Today the company is focused on expanding the Mona Lisa brand and developing the Messenger Collection, a brand of children's and adolescents' art and stationery products such as Glass Marker and Yard Art. The newest venture is a licensing agreement with the popular designer Rebecca Baer; the result is the Rebecca Baer Collection of products for stamping and stenciling with gold leaf.

The company is still managed by the founding family. Tim Mulvey started his career with Houston Art in 1984 and became President/CEO in 1996. John Mulvey joined in 2003 as Sales & Marketing VP after working at Binney & Smith, manufacturer of the Crayola brand.

Although the arts and crafts industry has grown by leaps and bounds since the mid-60's, it remains a close knit, friendly industry, Tim says. He appreciates the loyalty of his company's customers and vendors. "It's been a fun ride, and I look forward to the next 40 years."

Rolodex: 10770 Moss Ridge Rd., Houston, TX 77043-1175. Call 800-272-3804 or 713-462-1086; fax 713-462-1783; email timm@houstonart.com; visit www.houstonart.com.

Note: CLN will profile one company per issue, which will remain online for at least a year. A Profile is a perfect way for a new company to let itself be known to the industry, or for an established company to enhance its reputation by showing the industry its history, diversity of products, personnel, etc. For more information on how your company can be profiled, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

To read the current job listings, click on Jobs in the left-hand column or click HERE.

A. C. Moore (ACMR). Last*: 26.10 ... Change**: -0.34
Hancock Fabrics (HKF). Last*: 7.57 ... Change**: +0.09
Jo-Ann Stores (JAS). Last*: 27.06 ... Change**: -1.74
Michaels (MIK). Last*: 36.00 ... Change**: -0.30
Wal-Mart (WMT). Last*: 48.99 ... Change**: -1.12
CLN Retail Index. Last*: 145.74 ... Change**: -2.5%
Dow Jones Index. Last*: 10,404.30 ... Change**: -2.1%

Want to add some punch to your press releases? Make them memorable? Maybe adding similes, metaphors, and analogies would do the trick. These examples, emailed by a subscriber, are from the annual "Dark and Stormy Night" (bad writing) competition. They are actual analogies and metaphors found in high school essays.

1. Her face was a perfect oval, like a circle that had its two sides gently compressed by a Thigh Master.

2. His thoughts tumbled in his head, making and breaking alliances like underpants in a dryer without Cling Free.

3. She grew on him like she was a colony of E-coli and he was room-temperature beef.

4. She had a deep, throaty, genuine laugh, like that sound a dog makes just before it throws up.

5. Her vocabulary was as bad as, like, whatever.

6. He was as tall as a six-foot-three-inch tree.

7. The little boat gently drifted across the pond exactly the way a bowling ball wouldn't.

8. McBride fell 12 stories, hitting the pavement like a Hefty bag filled with vegetable soup.

9. Her hair glistened in the rain like a nose hair after a sneeze.

10. The hailstones leaped from the pavement, like maggots when fried in hot grease.

11. John and Mary had never met, like two hummingbirds who had also never met.

12. He fell for her like his heart was a mob informant and she was the East River.

13. Even in his last years, Grandpappy had a mind like a steel trap, only one that had been left out so long, it had rusted shut.

14. The plan was simple, like my brother Phil. But unlike Phil, this plan just might work.

REMINDERS

1. For more information on how your business can be the subject of a "Business

Profile" call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

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

3. If your company is a paid subscriber, everyone in the main office is welcome to register, free. Just click on "Current Subscribers Click Here To Register."

4. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page.

5. Creative Leisure News will return to its regular publishing schedule of the first and third Mondays of each month. Your next issue will be Monday, April 18.

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