Date: October 2, 2006
Vol. X, No. 19

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TABLE OF CONTENTS

COMMENTARY: Are You Rich? No? 

A recent question on a TwoPeas message board came from a clerk in an independent scrapbook store who asked if she should quit because she was paid only 50 cents above minimum wage and received a 20% discount for her own purchases; she was also required to teach, provide layouts, etc., in addition to waiting on customers.

I have no idea if she's being treated fairly. I do know, however, that often employees think they're underpaid to pad the boss's paycheck. And retailers of all sizes think manufacturers are making a fortune, while vendors believe the stores are raking in the big bucks.

A vendor recently wanted to explain the financial realities to his employees, so he brought them into his office in groups of 10 and put 100 pennies on his desk. "Suppose Wal-Mart gives us a $1.00 order; where do you think that dollar goes?" he asked. Then he showed them the company's costs: raw materials, wages, etc., and kept taking away the appropriate number of pennies. There weren't many pennies remaining, and the employees left the office with a better understanding of the big picture.

Kate's Collage. Why do some consumers stop crafting after childhood, or become dedicated enthusiasts? An independent retailer asks questions whose answers could make a significant boost for the industry.

Category Reports. An eyewitness account of the transformation of a life-long non-crafter into an enthusiast who has spent approximately $10,000 on our industry's products in the last 18 months.

It's that time of year when businesses of all sizes start thinking about 2007. Buyers and exhibitors, will your 2007 trade show schedule be different? More shows? Fewer? To vote, click on Industry Polls in the right-hand column or click HERE.

CLN readers apparently do not think the recent drop in oil prices will significantly boost their business during the critical fourth quarter. Only 5.3% of the voters in this unscientific poll said the lower prices would significantly boost their business. More than two-thirds, 68.4%, believe it will help their businesses, but not substantially, and more than a fourth, 26.3%, believe it will not affect their businesses.

For retailers and reps, one of the major, free events of the Memory Trends show isn't on the official show schedule: It's the unveiling of the first live presentation of the dotScrap Alliance and its software, FotoFusion v4.0. The event will be Tues., Oct 10 at 6:00 pm, immediately after the show closes for the day, in the ballroom of the Treasure Island hotel, across the street from the convention center. Admittance will be by show badge.

There will be food, goodie bags, and raffle tickets for $4,000 in prizes for attendees who will see the Alliance's solution to the digital vs. hard-copy scrapbook discussion. Sponsors promise attendees will experience the benefits of paper + digital for retailers, a next-generation software demo, a chance to meet execs from each Alliance member, and paper + digital content to examine in person.

More information will be available at the show at the LumaPix booth, #1186.

Consortium members include AMM, Autumn Leaves, Creative Imaginations, daisyd's, DMD, K & Co., KI Memories, LumaPix, Lineco, Li'l Davis Designs, Rastar, Scrapbook.com, Scrapjazz, SEI, and Westrim. For info in joining the consortium as a vendor or as a retailer, email biz@lumapix.com or call 877-586-2749. For more info on the unveiling, visit www.dotscrap.com.

As usual, the media is filled with predictions and surveys regarding the upcoming holiday season and the state of the economy. Often one study will contradict another, but it's especially true this year, since some surveys were conducted at the height of the gas prices, while others were conducted as prices fell. Take your pick:

1. The Conference Board's monthly survey of consumer confidence indicated consumers felt better in September. Its index of consumer sentiment rose to 104.5, up from 100.2 in August. The index had dropped to a nine-month low in August. "However, even though consumers' concerns have eased," said Lynn Franco of the Conference Board, "there is little to suggest a significant change in economic activity as we enter the final quarter of 2006."

2. A harbinger for Christmas? The National Retail Federation's Consumer Intentions and Actions Survey indicates spending on Halloween will be $4.96 billion, up sharply from the $3.29 billion spent last year.

3. But according to another survey by the NRF, total holiday retail sales are expected to increase 5.0% over last year. A year ago, holiday sales rose 6.1%, according to the NRF.

4. Deloitte and Touche's 21st Annual Holiday Survey concludes Americans will increase holiday spending by 7.0%, a bit less than last year's increase of 7.8%.

5. Execs of small and mid-size businesses are pessimistic, according to a study by the trade group, Vistage Int. By a two-to-one margin, respondents expect the economy to get worse over the coming year.

6. America's Research Group reports average credit-card balances have surged to $1,600, the highest in at least seven years, Bloomberg News reported. "If the consumer is stretched out before we even get to the holiday season, that'll be a concern,'' said Patricia Edwards of Wentworth, Hauser & Violich told Bloomberg News.

7. The International Council of Shopping Centers has forecast a 3% gain in same-store sales in November and December, down from a 3.6% increase a year earlier.

The old guard is cashing out. Jack Parker, Founder/CEO of A.C. Moore until his recent retirement, sold a half million shares of his company stock for $7,745,390.06 this past quarter.

During the same period, Jo-Ann's former CEO, Alan Rosskamm, sold 115,150 shares of his Jo-Ann's stock for $1,685,785.40.

Wal-Mart's former CEO David Glass sold 114,948 shares for $5,043,918.24. (Perhaps Glass, the owner of the Kansas City Royals, the worst team in major league baseball, is going to buy a shortstop.)

The big winner in the quarter, however, was Charles Wyly, Chair of the Michaels board. In July he sold 470,000 shares of Michaels stock for $19,956,200. Director Richard Hanlon sold 70,000 shares for $3,027,500.

Hobby Lobby Founder and CEO David Green made the Forbes 400 list of the richest Americans once again. The magazine ranked him 242nd with an estimated net worth of $1.5 billion. That's down from a ranking of 133 and a net worth of $2 billion a year ago.

Green started as an independent retailer who borrowed $600 and opened his first store – only 300 sq. ft. – in Oklahoma City in 1972. It was an outgrowth of Greco Products, a miniature picture frame company David founded in 1970. Today there are 378 Hobby Lobby stores in 29 states with projected sales of $1.65 billion.

There are other HL-related companies, too. Mardel is a 21-outlet chain of Christian stores; Hemispheres is a five-showroom chain for home furnishings/accessories; and Crafts Etc. distributes 20,000+ items to HL stores and other wholesale customers. There is also a construction company, an ad agency, and a Hong Kong buying office.

The only other industry-related member of the Forbes 400 is Sam Wyly, Vice Chair of the Michaels board and brother of Chair Charles Wyly (see above). Forbes rated Wyly #354 with an estimated net worth of $1.1 billion. To see the complete list, visit www.forbes.com.

(Comment: The fact that Forbes estimated that his net worth had declined in the past year should not be taken as evidence that Hobby Lobby is faltering. Green is renowned for his charitable projects, including donating to Liberty University, sending Bibles overseas, producing Christian films, and paying for religious ads in major-media newspapers. "The greater concern of ours is to say what we believe," Green told Forbes.)

The Nominating Committee of the Craft & Hobby Assn. has chosen Jori Hartwig (Marketing VP, Fiskars), John Laurie (President, Coats & Clark), Becky Jones (VP, Merchandising Manager, Jo-Ann's) and Maureen Ruth (President, Creative Marketing Solutions) for election to three-year terms to the CHA board of directors. Maureen would fill the remainder of the term of Ron LaRosa, who has submitted his resignation effective Dec. 31.

Cindy Groom-Harry (CM Marketing Connections), Jane Anne Davis (Jane Anne & Co.), Craig Curtis {Petersen-Arne), Larry Olliges (Dee's Crafts), and Carolyn Schulz (The Beadery) were nominated for a second three-year term. Terri Clair's (EK. Success) first term expires and she decided not to seek re-election.

The election will take place during the annual business meeting at the CHA Winter Show in Anaheim Jan. 27-31.

The sales of Primedia's Crafts Group of 11 magazines to Enthusiast Media, a subsidiary of Sandler Capital, has been completed for $132 million. The list of magazines includes includes Craftrends and its MemoryTrends show, Creating Keepsakes and its consumer conventions and events, Simple Scrapbooks, Paper Crafts, Quilters Newsletter, Quiltmaker, McCall's Quilting, McCall's Quick Quilts, Quilter's Home, Sew News, and Creative Machine Embroidery, as well as all other related events, special issues, and websites.

Former VP/Group Publisher Dave O'Neil will be CEO and Lisa Bearnson, founding editor of Creating Keepsakes, is Creative Director for scrapbooking. O'Neil said, "The acquisition by Sandler Capital will allow us to be more nimble in creating and responding to market opportunities."

This ends Primedia's foray into the craft industry. In the previous issue, CLN reported Primedia sold its Gems Group of magazines and events to Interweave Press, a subsidiary of Aspire Media.

Once again CLN's Retail Index outperformed the general stock indices in the third quarter. The CLN Retail Index rose 6.2%, while the Dow rose 4.7%, the S&P increased 5.2%, and the NASDAQ rose 4.0%. Late in the quarter the Dow momentarily, finally surpassed its record high of 11,750.28 that was set in January of 2000.

The industry leader was A.C. Moore, up 16.8%, followed by Jo-Ann's (+14.4%), Michaels (+5.6%), and Wal-Mart (+2.0%). Hancock trailed the pack, down 15.3%.

Others: Target rose 13.0%, Martha Stewart increased 6.4%, and Meredith was flat. Primedia lost 19.1%. (Note: This will probably be the last time we'll report on Michaels and Primedia. This week voters are expected to approve the sale of Michaels – and therefore take the company private, and with the sale of it's Crafts and Gems groups, Primedia has left the industry.)

Sandra Smith begins working as A.C. Moore's VP/GMM tomorrow, Oct. 3, joining Neil Silverman who started with the company as Dir. of Imports and DMM in August. Both report to President/COO Larry Fine.

Smith had served as DMM for Home Goods, a division of TJX. Prior experience includes VP/Merchandising for Art Store, a specialty retailer of art supplies, and Sr. VP/GMM of Hardlines for Bradlees. She will be responsible for fashion crafts, including scrapbooking, art supplies, wedding, ribbon, jewelry, and apparel.

Silverman is responsible for the development and implementation of global sourcing and importing, as well as managing the seasonal, floral, home dec, and candle departments. He had been Operations Manager for Advance Int., responsible for buying and importing, and Rag Shops, where he was Director of Imports and DMM.

Jo-Ann's named Michelle Christensen VP/GMM for sewing and Justin Simmons as VP/Inventory Management. Both are from Fred Meyer, the former employer of new CEO Darrell Webb and Travis Smith, Exec VP of Merchandising and Marketing.

Christensen had been Fred Meyer's Group VP/Home. Simmons had been Fred Meyer Group VP/General Merchandise. Simmons will lead a new department that combines the replenishment, forecasting, and allocation efforts with merchandise planning.

1. For the first time, the list of CHA Winter Show pre-registered attendee/buyers will be available to exhibitors for free. It will be available through a bonded mail house only. (Phone and fax numbers and email addresses are not included and mailing lists are never given out to non-member companies.) Contact CHA's Semo Sennas at ssennas@craftandhobby.org. (Comment: Smart buyers make a list of booths to visit before the show. Makes sense to communicate with them while they're comprising their list.)

2. The CHA Summer Show included a seminar, "Weigh In and Measure Up," designed to help member vendors adhere to federal, state, and local product label requirements. The seminar showing how to take "easy steps ... to get things under control" is available on the Internet. Members can download the support materials for free or listen to the presentation for $10.00. For more info, contact Christine Cutti-Fox at cfox@craftandhobby.org. To surf to the presentation, visit www.insightu.org/hobby/onboard06/audioorder.htm.

3. Online registration for the Winter Show begins next month. Hotel/travel arrangements can be made NOW through Par Avion at www.chashow.org. Click on "Attendee Information."

4. As part of CHA's 6th annual Celebrate the Season, CHA spokesperson Teri O conducted a satellite media tour featuring projects donated by Creative Crystal, Creative Imaginations, Digital Scrapbook Memories, DMC, F&W/Krause Publications, Toner Plastics, and Xyron. TV stations that interviewed Teri were in Huntsville, Youngstown, Eugene, Cheyenne, Tyler, Tucson, Fresno, San Diego, Phoenix, Kansas City, Portland, and Greensboro.

American Traditional Designs® (#1353) will unveil the Snow Day collection of papers, coordinating albums, and embellishments, including new Printed Ribbon; 16 Printed Ribbon collectionseach with five designs; four distinct palettes of textured cardstock; and embossed and glittered alphabet stickers and alphabet basics.

Avery Dennison(#1283) will introduce a line of products that enable consumers to design and decorate 12" borders, tags, titles, captions, and journal entries with personal quotes, favorite designs, matching colors, and photos.

E.K. Success is launching a Baby collection, a coordinating line of paper craft products for scrapbooks, shower invitations, birth announcements, and nursery decor. Other items include Merry Glo Round™ light box, a Drinks Delight line, and several line extensions.

Just Jinger Designs (#291) has added six new pre-made 12"x12"dimensional page spreads and 18 new tags and file folders.

(Note: CLN has launched a section devoted to new products and any vendor is welcome to submit material. However, CLN will not publish photos and lengthy descriptions – that's the trade magazines' forte. CLN will publish a very brief description and a link to it IF the vendor's website has a description of the product or line. So vendors, email your product press releases to CLN at mike@clnonline.com WHEN the product is on your website.)

Artscapes offers 3D reproductions of art with actual textured brush strokes you can feel, making them virtually indistinguishable from the original. Visit www.brushstrokesfineart.com/artscapes. (Industry veteran Mark Hill is the company's Chief Marketing/Sales Officer.)

Dimensions has new designs in its PaintWorks line of paint-by-number kits. Visit www.dimensions-crafts.com.

Interweave has published Time to Weave: Simply Elegant Projects to Make in Almost No Time, by Jane Patrick, and Spin to Knit: The Knitter’s Guide to Making Yarn, by Shannon Okey and is sending the authors on "blog tours." To see the authors' schedules, visit Schedule online at: www.interweave.com/weave/events_exhibits/spin_weave.asp.

Scrapbooking Roads: a Travel Guide for Scrapbookers, compiled and edited by Kim Ivkov, is a guide to hundreds of local shops, consultants, and resources. Visit www.scrapbookingroads.com.

Stampington. Mixed-media artist Lynne Perrella and 50+ designers revisit – and reinvent – paper dolls in the new book, Beyond Paper Dolls. Visit www.stampington.com.

Stencil Ease allows consumers to create their own custom stencil with just a few clicks of the mouse. There are 25 lettering styles to choose from and the option to have those letters or numbers be 1" to 22" high. Visit www.stencilease.com/configure.asp.

For free Halloween how-tos using Styrofoam brand foam products, visit http://craft.dow.com/index.htm.

The 9/18 issue of CLN inspired a wide variety of responses – too many to reprint in a newsletter. Here's an edited sampling. The original articles are in the archived sections of Kate's Collage and Category Reports.

1. Privacy and Internet scrapbook sites: Currently there are groups which require posters to include their name, city, and state. That's almost enough information for identity theft.

Yet when members questioned this, they were told how "safe" their "members only" message board was. Well, based on information in that supposedly safe environment, my elderly mother was "visited" unannounced by members of the group who just assumed she would be glad to have them come by; since I was in the business, it must be okay right? At the time I was out of town and she lived alone. Fortunately one of the gentleman in the senior complex was concerned and came in and stayed until these strangers could be convinced to leave.

Daily children are lured away from their parents because of information posted on the Internet, and worse. It is an article full of serious food for thought about the unintended consequences. – Wheat Carr, Wandering Wolf

2. Your Fresno store owner said it all, and said it well. Personally, I'd like to see a reality television show called "walk in their shoes" where you take griping, never-satisfied customers (such as your MBA/Designer) and put them in the position of your average store owner for a month or two. I'd bet my last dollar that they would quickly change their tune! – Lisa Kanak, The Cropper's Corner

3. Regarding the MBA/designer/customer's complaints: You could replace scrapbooking with any other sub-category of crafts and find the same complaints. I think the author's suggestions were from the viewpoint of a consumer, not an MBA, but that seems to have been lost on some of your readers.

However, what never changes is the defensive posture taken by the target audience. It's human nature to want to moan and complain and blame others for whatever problems we have. But what's worse is whining and moaning about every suggestion made to improve the situation. So when a reader takes the time to blast the author's suggestions, it tells me that those suggestions will never receive thorough or thoughtful consideration. Sure, not every idea will work in every situation. Everyone says they want "straight talk," unless the straight talk is aimed at you. Actually, I thought some of her ideas to be quite good. – Name Withheld

4. Regarding a store owner's complaint that "contract instructors do not seem to understand that they can not use products we don't carry." How very short-sighted. It would seem to me the shop owner would meet with the contract instructor to plan out the classes, not just allow the instructor to show up and teach a class. If the instructor is using a product not in inventory, why not bring it in? Most retailers can get the products they need from a distributor or the manufacturer. If they don't want to make a minimum order for a specific product, just ask the distributor or manufacturer to make an exception. I can't think of one time that I turned down a retailer's order because it didn't meet my minimums. If it sells out, they'll be back. An instructor's success is based partly on her/his ability to teach a class using materials with which they are familiar. Offering these classes is a value-added service, which may or may not result in a big profit at the end of each class. The profit comes from repeated patronage from the students. – Susan Monahan, Masterson Art

1. Your next issue of CLN will be a bit late. I'll be attending the Memory Trends show, then a CHA board of directors meeting, so the next issue will be Monday, Oct. 23.

2. Interesting conversation with Rudy Heukels of R.H. Int. Rudy helps European companies enter the U.S. market and U.S. vendors in Europe. He spoke about the change in the dollar vs. the euro in the past five years. In 2001, a euro cost about 80 cents. Today it exchanges for $1.26. That makes U.S. products less expensive in Europe. How big is that market, excluding Great Britain which hasn't adopted the euro? About 600 million people.

He also talked about a client who closed his factory in the Netherlands and moved it to Poland because of the lower wages there.

MICHAELS. Updated its forecast for the third quarter and last half of fiscal 2006. The company now expects quarterly same-store sales to be at the high end of its previous guidance of 1%-3%, due to better sales trends, including a 3.5% increase in August same-store sales. Execs also see better gross margins, too. For the second half of fiscal 2006, the company now expects same-store sales to increase 2%-4%, total net sales to rise 8%-10%, gross margins to grow approximately 100 basis points, and operating income to increase approximately 20%.

YARN. Actress and Emmy winner Tracey Ullman was interviewed on National Public Radio's Morning Edition on Friday, raving about how she had re-discovered knitting and now knits almost daily. She's co-authored a new book, Knit 2 Together, with Mel Clark, a Los Angeles yarn store owner. "It's like a woman's birthright to knit," Ullman told reporter Renee Montagne. "It's primal. It's timeless. You don't need electricity to knit. You can do it with a candle, girls!" It's published by STC Craft. To read/hear the entire report, visit www.npr.org/templates/story/story.php?storyId=6159769.

BEST WISHES. Our very best to long-time industry veteran Dotty Grexa, former Jo-Ann's VP/GMM of the Sewing Division and Chair of the Home Sewing Assn. board, and to Bill Reed, formerly of Meredith and most recently of F+W Publications. Both have resigned to pursue other interests. (Dotty can be reached at djgcraft@aol.com and Bill at williamreed07@gmail.com. ... And to Allan Kretchman, Sr. VP of Sales who is retiring from Westrim/Creativity after 20 years. The sales department will be jointly managed by Sales VPs Angie Bright and Christine Alm. The company's Exec VP/Business Development and Mergers & Acquisitions Jerry Payton has decided to step down in order to permanently reside with his family in Omaha, after five years of commuting from his home in Omaha to Van Nuys, CA.

LOOKING TO HIRE. Xyron is looking for an Education Manager and a Sr. Product Manager based in Scottsdale, AZ. Submit resumes to employment@xyron.com ... A multi-billion-dollar company is looking for a CEO for its $30-million, Chicago-area craft division. For a confidential exchange of info, email Wolf Gugler at Wolf Gugler & Associates, wolf@wolfgugler.com.

PEOPLE. Sugarloaf (www.sugarloafproducts.com), manufacturer of the See-D’s Clear Stamping System, Whispers inks, and new Whispers Strokes™ Dual Tip Markers, has added new staff members, author/designer Kathleen Summers and designer/illustrator Marlis Cornett. Marlis has been a freelance designer for Sugarloaf over the past few years. She has worked with rubber stamp design, and has provided design for the company’s website and product packaging ... Jane Beard is a Sr. Editor for Avalanche Publishing ... Ed Bolen was promoted to VP/GM of Caron Int., the craft division of National Spinning, responsible for all aspects of the division, and will continue to develop long-term strategy to grow and diversify the products offered to the craft marketplace.

Promotions. The National Scrapbooking Assn. announced Harvesting Memories Crop & Shop events will be held on Veterans Day Nov. 11 to raise funds for Trees for Troops, designed to boost the Christmas spirit for U.S. military men and women organized by the Christmas Spirit Foundation and Federal Express. Crop & Shop events are already scheduled for San Diego, Las Vegas, St. Louis, and Michigan with other locations to be named soon, the NSA says. Sponsors include Hewlett-Packard, Fuji, Energizer, Memories in Uniform, and Bluegrass Publishing. Visit www.harvestingmemories.org for details.  

ACQUISITIONS. Pacon Corp. agreed to acquire the assets of the Strathmore Artist Papers division from Mohawk Fine Papers. The division includes fine art papers, textures, and decorative sheets, greeting card papers, and digital photo and inkjet papers marketed under the Strathmore Artist® brand ... Bowmark Capital has acquired Design Objectives, a UK supplier of paper craft products. Terms were not disclosed.  Lines include Papermania, Anita's and X-cut. Andrew Knowles remains as Managing Director.

STOCK. Standard & Poor's Equity Research lowered its rating of Jo-Ann's to 3 STARS (hold) from 4 STARS (buy), Business Week Online reported. S&P expects this fiscal year to be very tough, but foresees a big improvement next year.

SHOWS. Attendees will save time – and money – by preregistering online for the 7th annual Memory Trends show Oct. 10-12 in Las Vegas. But preregistration ends tomorrow, Oct. 3. Visit www.memorytrends.com/register.cfm. The show's manager, Universal Event Management, expects 4,000 attendees and 500 exhibitors.

MODERN WORLD. Wal-Mart has partnered with China's Bank of Communications to offer the country's first credit card issued by a foreign retailer.

NO COMMENT. A recent TwoPeas message board contributor proudly showed off a photo of her ankle, tattooed with a Heidi Swapp design ... Another contributor said her local scrapbook store had installed six security cameras – and voice recorders.

To see the latest listings by the only personnel recruitment firm specializing in our industry, click on Jobs in the left-hand column or click HERE.

A. C. Moore (ACMR). Last*: 19.03 ... Change**: +0.07
Hancock Fabrics (HKF). Last*: 2.87 ... Change**: -0.09
Jo-Ann Stores (JAS). Last*: 16.72 ... Change**: -0.01
Michaels (MIK). Last*: 43.54 ... Change**: +0.32
Wal-Mart (WMT). Last*: 49.32 ... Change**: +1.08
CLN Retail Index. Last*: 131.48 ... Change**: +1.1%
Dow Jones Index. Last*: 11,679.07 ... Change**: +1.0%

If any CLN readers wonder if at least some members of the younger generation really are different from the our traditional customers, they should visit the website, Knitta (www.knittaplease.com/Tag.html). There have always been people who put graffiti on public buildings. Now it's "tagging," we're told. This site has numerous photos of the results of people tagging the world – with yarn. "A tag crew of knitters, bombing the inner city with vibrant, stitched works of art, wrapped around everything from beer bottles on easy nights to public monuments and utility poles on more ambitious outings."

Then click on "Links" to see a number of other sites with crafts your mother doesn't want to make: Extreme Craft (www.extremecraft.com) "A compendium of craft masquerading as art, art masquerading as craft, and craft extending its middle finger." ... The AntiCraft (www.theanticraft.com) offers how-tos for some, uh, interesting items.

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xxx

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