Date: November 20, 2006
Vol. X, No. 22

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TABLE OF CONTENTS

COMMENTARY: ANGRY CUSTOMERS ARE DANGEROUS 

A recent thread on the Two Peas message board is a graphic example of the power of the Internet. Someone complained that a clerk in a Hobby Lobby was rude. Who knows what the truth is, but this customer thought the clerk was rude – and ranted on the message board. (When you have thousands of employees like any large chain, someone, somewhere, some time is going to appear to be rude.) Then other Peas chimed in, some pro HL, some complaining. In the pre-Internet days, an angry customer would tell a few friends; today she's telling thousands.

Business-Wise. It appears to be a classic case of a major manufacturer betraying independent retailers. Mike Hartnett weighs in on the issue.

Kate's Collage. The National Retail Federation gave advice to consumers on how to get the best value while Christmas shopping in our stores. Read the NRF's advice here.

(Note: If you visit a column and it appears to be an old column, click on "Refresh" or "Reload" button on your browser.)

In the last issue, CLN listed some effects the industry would feel if Wal-Mart ever dropped its craft and fabric departments. Now it's your turn: Would the lack of our industry's products in Wal-Mart help or hurt the industry? (Note: To read the original article, click on "CLN Archives" in the right-hand column, then "2006," then "11/06/06.") To vote, click on "Industry Polls" in the right-hand column or click HERE.

(Note: Most participants in the CLN poll voted on Monday, Nov. 6, the day before actually voting in the election.) A whopping 63% of the voters in CLN's unscientific poll said the U.S. was going in the wrong direction. Only 14.8% thought the country was on the right track, and 22.2% were not sure.

As was the case in the actual election, voters took out their wrath on incumbents and Republicans. Democratic candidates for the House of Representatives received 56.6% of the CLN election votes, while Republicans received 41.5%. Only 1.9% were not sure who would earn their vote, planned to vote for a third-party candidate, or did not plan to vote.

Almost half of the CLN voters, 48.9%, planned to vote against their incumbent, while only 29.8% said they would vote for the current office holder. Almost a fifth, 17.0%, were still uncertain, while 4.3% said there was no incumbent in their local race.

(Comment: From syndicated columnist Leonard Pitts of the Miami Herald: "I suspect I speak for many when I say I'm tired of wedge politics. I'm tired of stupid. I'm tired of greed. I'm tired of polarization. I'm tired of red and blue mattering more than red, white, and blue.")

Shareholders filed a federal lawsuit last week against The Blackstone Group, Bain Capital, and 11 other private equity firms claiming their investments were hurt when the buyout firms violated antitrust laws, Reuters reported. Blackstone and Bain recently acquired Michaels for $44/share. Blackstone President Tony James told the Reuters Investment Banking Summit he had never seen collusion, but representatives for Bain and Blackstone declined to comment.

The suit alleges the investment firms conspired to fix deal prices, and Reuters quoted the suit as claiming the plaintiffs claimed they "were paid less for their equity shares that they sold to the private equity defendants and their co-conspirators than they would have been paid under conditions of free and open competition."

The lawsuit seeks unspecified damages and asked the District Court in Manhattan to grant it class action status.

Not much. Until January we'll have a lame duck Congress and President, and the 2008 election campaign will start in earnest in about a year. That gives the Democratic Congress only about a year to make good on campaign promises, and President Bush still wields the veto pen.

1. Minimum wage. Look for Congress to increase it, but more than half the states already have a higher minimum wage. President Bush will sign the bill, especially if there are safeguards for small businesses.

2. International trade. Congress may pass legislation to pressure China to allow its currency to float against other currencies, thus making U.S. products more price competitive; clamp down harder on copyright violations; and improve its human rights record. But don't count on President Bush to sign it for two reasons: A) As long as the U.S. needs Chinese help controlling North Korea's nuclear program, President Bush won't be tougher on other issues. B) China has helped finance our federal budget deficit, in effect becoming a banker for the U.S. When is the last time you threatened your banker?

Earnings. Jo-Ann's releases its third-quarter earnings today (Monday) after the market closes, and CEO/President Darrell Webb and Exec VP/CFO James Kerr will hold a conference call at 4:30 pm EST. The call will be broadcast live over the Internet.

The call can be accessed at Jo-Ann Stores' web site at www.joann.com. (Click on "About Jo-Ann Stores" at the top of the page; then "Our Company"; then "Investor Relations"; then the "Conference Call" icon.) The call will be archived for those unable to listen to the live call.

Warehouse. GE Commercial Finance Business Property Corp. purchased the 631,000-sq.-ft. Jo-Ann's west coast distribution center in Visalia, CA for an undisclosed amount. The deal is a sale-leaseback transaction and Jo-Ann's operations there continue.

Finances. Moody's Investors Service downgraded all ratings of Jo-Ann's and left the ratings on review for possible further downgrade. Moody's believes the current liquidity position is adequate. "However, comparable store sales and margins have fared poorly over recent quarters as most categories have generated weaker results than industry peers. In Moody's view, customer count and sales conversion have fallen as potential customers have not found an appealing product selection and shopping environment at Jo-Ann. Moody's believes that the company's strategic options could considerably narrow if the fourth quarter is weak given our expectation that the new CEO may not have an impact until the second half of calendar 2007."

Internet. Joann.com launched its holiday shopping season with sales, deeply discounted door-busters, and free shipping promotions. Discounted prices are offered on 1,000+ "Gifts to Make" such as dollhouses, jewelry, and hand-knit projects; 500 "Gifts to Take" such as scrapbooking totes and thread sets; and 300+ "Holiday Decorations" with Christmas trees and collectible ceramic houses.

Caron Int. has acquired Westex, a New Jersey-based importer of needlework notions and accessories which are sold in the industry's major chain stores. Neil Finkelstein, president of Westex and long-time industry veteran, will join the management team of Caron, which is a division of National Spinning.

"We are delighted to add the Westex line of products and Neil’s considerable expertise to our resources as a category leader," notes Caron's Ed Bolen, VP/General Manager. "This acquisition expands our presence in the yarn and stitchery aisle and complements our extensive yarn, needlework kit, and knitting machine lines. "As we pursue a focused plan for growth and diversification of the Caron product offering, we expect to leverage Neil’s experience and expertise in sales, global sourcing, and new product development."

Current Westex operations have been relocated to, and customers will be serviced from, Caron’s Washington, NC distribution center.

The U.S. Consumer Product Safety Commission, in cooperation with Provo Craft, announced a voluntary recall approximately 76,000 decorative snaps and metal clips because they contain high levels of lead, which can cause adverse health effects if ingested by young children. No injuries or incidents have been reported..

The recall involves the Rob and Bob Studio Clip-Ease metal clips with model numbers 28-1084, 28-1085 and 28-1086 and the Rob and Bob Studio Snap-Ease snaps with model number 28-1080. The product name and model number can be found on the packaging.

According to the CPSC, the products have been sold in scrapbook stores and craft retailers nationwide from August 2005 through October 2006 for about $6.

In the previous issue, CLN confessed to confusion when reporting on yarn sales and asked for help. Some comments from readers:

1. "Just from wholesalers I’ve had recent contact with, I have heard that the independent side of the yarn market is still staying strong. While yarn sales had dropped from last year’s all-time high, this fall it's self correcting and some businesses are actually seeing growth again." – Yarn Manufacturer

2. "Prices are low because yarn is being sold everywhere." – Craft Retailer

3. "Yarn seems to be going nowhere. Sales are still well above three years ago, but still languishing at the levels of last fall. We think there is just nothing inspiring for the consumer to latch onto. Your note about Julia Roberts and the Friday Night Knitting Club [movie] should be something our marketing geniuses should jump all over. It should be a huge shot in the arm for all crafting." – Ben Franklin Retailer

4. "We sell to hundreds of knitting shops and the large catalog/internet companies. The catalog customers seem to have weathered the slowdown better than the individual shops have. Most of our catalog companies are up from last year while only some are down slightly.

"We may have been experiencing a slowdown in the knitting industry recently for two reasons: A) a reduction in overall demand from the public, and B) a shift in buying patterns to online and catalog purchases and away from storefronts, independent and chain. Gasoline prices and the overall shape of the economy also have an influence on these issues.

"We need to keep the industry moving with new ideas, designs, and new products. We consistently generate the majority of our income from the products we have introduced within the last 12-18 months, year after year. The old ones never go away, but the new ones generate interest and excitement and help us grow as a result. – Yarn Tool/Accessory Manufacturer

Wal-Mart reported sales for the third quarter rose 12.0% to $83.543 billion. Income rose 7.1% to $2.594 billion $0.62/share).

"Although sales in the U.S. were softer than we hoped for in the third quarter, there are real opportunities in the fourth quarter to build on the momentum of the aggressive pricing strategy we have implemented in our stores for the holiday season," said CEO Lee Scott.

For the third quarter the Wal-Mart Stores segment had operating income (income before net interest expense, income taxes, unallocated corporate overhead, minority interest, and discontinued operations) of $3.639 billion, an increase of 9.9%. Same-store sales for the company's U.S. stores rose 1.5% for the quarter and 2.3% for the first three quarters.

Meanwhile, Target's third-quarter profit rose 16% and sales rose 11%. Earnings were $506 million ($0.59/share). Analysts surveyed by Thomson Financial were expecting $0.55/share. Revenue rose to $13.57 billion from $12.21 billion, and same-store sales increased 4.6%. CFO Doug Scovanner said the company expects to earn $3.17/share for the full year.

Although I work in the craft industry, I was a craft consumer first and I'm still a craft consumer. Unlike most, I did not craft as a child, but picked up crafting in my very early 20's.

I've stopped purchasing craft supplies over the last few years because I'm bored with most crafts today. Actually there is only one main craft featured in our industry and that, of course, is scrapbooking. Beading and the needlearts are featured in magazines and I do projects from time to time, but nothing like I did in my 20's and 30's. Everything is focused on

paper and I am just not inspired by what I see. I'm tired of bad customer service and trying to find the supplies I really want. I work too hard to spend my money in a store where the staff seems to be having a bad day everyday! All my supplies except yarn were purchased online.

So what filled the gap? Gardening and cooking. Practical. Plenty of inspiration. And I'm not bored. However, I will say that I am enjoying knitting, needlepunch, and felting (with roving, not squares!). I've spent several hundred dollars on those three crafts in the last 12 months. My

inspiration has come from the web and I'm grateful for websites more and more as the industry remains stuck in "memories." – Name Withheld

I always swore I would never be bitten by the bead bug. Jewelry making was not my thing and I just did not need another craft to add to my list and in exploding studio.

Then it happened. I was sucked in by the "pretties" and the wham-bam-thank-you-ma’am ease of the hobby. I resisted for so long, even though so many of my friends were bead artists, bead editors, and bead makers – but eventually I gave in to the bead madness.

I could actually buy beads, go home, and put together a piece of jewelry in less than the time it took me to lay out all my adhesives for a collage project. But the best part for me?

This craft, unlike any of the others I have done, allows me to really wear my creations out in public. Because I live in a warm climate, my crocheted and knitted items sit unloved and unworn. I can actually show people what I do in my "spare time" and get compliments that are spontaneous and not solicited (unlike when you drag a friend in to see your latest stenciling project or altered book).

Plus, the gift-making potential is awesome; most women love jewelry, and I can match the beads to their personality and wardrobe to make the gift unique to them. Another added plus is that it also makes me a "cool mom" in the eyes of my 13 year old. She and her friends love to sit and bead with me. They go home with a finished project and I get to hear all about their lives as they craft and chat. I was even able to buy some strands of Pokemon beads for my 10 year-old son. We have no idea what we will make with them but he was thrilled!

Beading is a great hobby for those with limited space, time, and money. You can start small and for less than $50 be on your way to great results. Not too many crafts are like that. Plus, you keep up with the trends easily and your results are store quality (not as easy to do with sewing/crocheting). You can sit for 15 minutes or 5 hours, so it fits my unpredictable schedule. It is also the one hobby I have been able to pull my previously non-crafty friends into: the results are instant and there is no frustration factor or learning curve for simple stringing. I am still a simple stringer most of the time, but one day I may throw myself into more artistic creations. It’s all about the beads.... – Pam Smart

(Note: CLN 's new section is 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.)

Artograph introduced its Animation Light Box for animation and cartooning products. Visit www.artograph.com.

Brushstrokes has unveiled Artscapes, a new line of stationery and home dec products using its remarkable, patented 3-D art reproduction process that makes the reproductions look – and feel – like the original paintings. Visit www.brushstrokesfineart.com/artscapes.

C&T's Spring/Summer 2007 catalog is available. Call 800-284-1114 for a copy. There are new titles on quilting, fiber arts, paper crafts, and knitting/crochet.

F+W's North Light Books will release Domiknitrix: Whip Your Knitting Into Shape by Jennifer Stafford on Dec. 1. It's filled with edgy projects for the younger crowd. Stafford's website is at www.domiknitrix.com. Other new titles include YarnPlay by Lisa Shobhana Mason and Crochet Squared by Marsha Polk. Visit www.fwpublications.com.

The Image Permanence Institute at the Rochester Institute of Technology has two excellent free guides, "A Consumer Guide for the Recovery of Water-Damaged Traditional and Digital Prints" and "A Consumer Guide to Traditional and Digital Print Stability." Download them at www.imagepermanenceinstitute.org.

Clotilde redesigned its website and added new features. The site features about 2,000 sewing and quilting items. The mail order company was started in 1971 by Clotilde Lampe selling All-Purpose Pins from her garage, and was sold to Dynamic Resource Group in 2002. Visit www.clotilde.com.

Dimensions' Spring 2007 Needlecrafts catalog is now available. Call 800-523-8452.

Interweave Press is offering 10 free holiday craft patterns to its website. To see projects with Christmas and winter themes, visit, www.interweave.com/magazines/holiday.

Magnetic Poetry has introduced three new impactful Words & Crafts Letter stamp collections: Big Letter Stamps-Upper Case, Big Letter Stamps-Lower Case, and Smarty. Visit www.wordsandcrafts.com or www.magneticpoetry.com.

Nancy's Knit Knacks is now shipping its commercial grade Heavy Duty Ball Winder for knitters. Visit www.nancysknitknacks.com/ball_winder.htm.

Search Press USA just launched its own website with the latest info on almost 30 new titles, including five jewelry and beading books, two reissued highly collectible vintage knitting books, and the first three titles in the new Passion for Paper series. Visit www.searchpressusa.com.

Unibind unveiled its PhotoBook Creator, a do-it-yourself complete photo binding system for consumers. It can make hard-cover 8 ½" x 11" personalized photo albums in seconds. Visit www.thomas-pr.com/pressreleases/unibindcreator.html.

Earlier this month Vietnam received approval for membership in the World Trade Organization, which cleared the way for Congress to pass legislation granting Vietnam permanent normal trade relations. According to the Wall Street Journal, President Bush pushed for speedy approval so he could announce it during his trip there, but that required a two-third's vote, and the lame-duck Republican House refused to go along. The bill only received a majority of votes, and is expected to pass later this year when only a majority is required.

Why mention this in a craft industry newsletter? Because some far-thinking importers, worried about having too many of their eggs in the Chinese basket, are looking to Viet Nam, whose economy has grown even faster than China's.

Want to know more? Craft industry veteran Bill Shugarts has founded Tradewinds, designed to help U.S. companies do business in Vietnam. Email Bill at wshugarts@aol.com.

1. Members' online registration for the Winter Show in Anaheim is now available. Visit www.expologic.com/chawinter.

2. Rob Bostick, CEO of JudiKins, was named to the board of directors, replacing Ron Staffieri who accepted a new position outside of the industry. His term is effective immediately and will run through December 2008. Bostick and his wife Judi Watanabe founded JudiKins, a manufacturer of rubber stamps, in 1988 in their garage. The company has won four CHA Innovations awards. In 1991, his company purchased a small stamp store called Stamp Stamp Stamp that quickly grew into four store locations. Those store ultimately evolved into the online store, www.stampstampstamp.com (Note: To read some of Rob's thoughts on the industry, see his column, "We Need Hog Wild Crazy Customers," Visit click on "Memory, Paper & Stamps" in the left-hand column or click HERE.)

3. Exhibitor deadlines. Want CHA to invite particular buyers to the show? Send the Buyer Invitation Form to CHA by Dec. 4 ... To have new products included in the Innovations showcase, register by Dec. 21. The forms are included in the "Power Marketing Program" sent to all exhibitors. For a copy, call 800-822-0494.

4. Five scrapbook companies joined forces to present a Mega Workshop on Sat. Jan. 27 (noon-5:00 pm), "Class Magic with 5 Industry Innovators." Memories in Uniform, Timeless Touches, Bisous, Croppin’ Companion, and Art Declassified will each be teach a project or an organization system.

5. CHA is seeking candidates for its Nominating Committee to serve a one-year term in 2007. The Committee is an autonomous group responsible for nominating candidates to the board of directors. Nominate yourself or another eligible member by completing the online submission form at www.craftandhobby.org/2007membernom.html. The deadline is Nov. 24. The general membership will choose the five winners. Voting will be by written ballot or by electronic voting at a kiosk to in the registration area at the Winter Show until close of business Jan. 29. The winners will be announced at the annual business meeting breakfast, Jan. 30.

STORE HOURS. Stores opening on the Friday after Thanksgiving at 6:00 am is becoming old hat. Now many stores and malls plan to open the minute after Thanksgiving, the Baltimore Sun reports.

LANGUAGE. After being criticized by some religious groups for saying "Happy Holidays" on signs, displays, and ads instead of "Merry Christmas" last year, Wal-Mart is returning to "Merry Christmas."

GIFT CARDS. The National Retail Federation Gift Card Survey found that gift card sales will total $24.81 billion this holiday season, up $6 billion over 2005. Plus, the average consumer will spend more on gift cards than last year ($116.51 vs. $88.03).

FLORALS. ""There seems to be a surge of interest in dried floral arrangements this year. We've got a lot of people coming in for supplies to make seasonal dried arrangements they're intending for Christmas gifts. And molding, decorating, and personalizing stepping stones – with hand prints, messages, and colorful jewels or stones – is a very popular Christmas gift project." – Bryan Crowder, Hobby Lobby store manager (Springfield [MO] News Leader)

QUOTATION. "Although gas prices have declined, the slow housing market appears to be hurting consumer spending power as home improvement and home furnishing categories begin to struggle. With the holiday season just around the corner, retailers hope consumers are ready to bounce back .... " – Rosalind Wells, Chief Economist for the National Retail Federation

WEARABLES. The Nov. 16 edition of NBC's The Today Show included a segment in which Bobbi Thomas used craft products such as Duncan's Tulip and Aleene's Tacky Glue and Plaid's Mod Podge to "Add a dash of dazzle with D.I.Y. style" to clothing, purses, and jewelry. Thomas is the co-host of The Fashion Police on the Style tv network. To read an abbreviated version of the segment, visit www.msnbc.msn.com/id/15732741.

BEADS, I. Retailer Kathy Olliges of Dee's in Louisville writes, "I just got back from a trip to New York; it's been about 2 1/2 years since I have been there. I was amazed at the amount of bead stores that have opened in the garment district. They are mostly retail/wholesale operations. There was at least 1-2 bead stores per block. One had a room about 15-20' that was all turquoise strands. They seemed to be geared toward wholesale, but also are selling to anyone off the street. If this is any indication to the strength of the bead industry. it is very encouraging."

BEADS, II. Dimensions Bead Blast kit was the Grand Prize winner for activity toys for ages 8-9 in Family Fun's Toy of the Year contest.

PAINT. The Chicago Bears are having an excellent season and the fans are excited. So excited, in fact, that the Chicago Tribune published an article on how to paint your face in Bears' colors. The article recommended Palmer face paints.

SCRAPBOOKIING, I. All My Memories has discontinued its paper and embellishment lines to concentrate on expansion into the scrapbook/photo storage options, craft organization, and on-the-go portability product markets, and expanding its network of distribution partners. The company is closing out its inventory of papers, card stocks, ribbons, and hard and soft embellishments at prices below wholesale. Visit www.allmymemories.com.

SCRAPBOOKING, II. Linda Fantin of the Salt Lake Tribune wrote a funny article with a serious point, "Have scrapbookers cropped out their sense of humor?" She argues that consumers concentrate on "sweet" and rarely create pages that make people laugh. She suggests a slogan from Matt Groening, creator of the Simpsons: "Families are about love overcoming emotional torture.'" Fantin blames manufacturers for not providing more levity in their products. To read the complete article, visit www.sltrib.com/ci_4649418.

SCRAPBOOKING, III. The National Scrapbooking Assn. offers NSA consumer members a card that enables them to receive discounts at participating NSA stores. Visit www.nsa.gs.

WORTHY CAUSES. Visit www.savethechildren.org to download an action kit and patterns to knit/crochet caps for poor babies around the world. The Warm Up America! site, www.warmupamerica.org, has info, too.

NEW COMPANY. Industry veteran Mark Lee, previously VP for AMACO and Makin’s Clay, has formed DreamSolutions Marketing. Mark and his team will focus on marketing, national sales rep development/management, domestic and international sourcing, product development, web design, and consumer research. Mark is specializing in strategically expanding product placement for small and mid-size companies in typical craft and art channels and non-traditional distribution channels. To contact Mark, call 317-270-0836; email markhlee@insightbb.com, or visit www.dreamsolutionsmarketing.com.

LOOKING FOR REPS. Helmar Australia is looking for U.S. manufacturer’s representatives. Call CEO Mark Ripper at (011 612-9627-4666) or email (mripper@helmar.com.au).

PEOPLE. The Dallas Morning News published a fascinating profile of Don Mechanic, of Don Mechanic Ent. To read about his comeback from bankruptcy (the retail chain, Zaks) and his relationship with Mike Dupey, visit www.donmechanic.com/files/article_knight.htm ... A.C. Moore named Roxanne Stankiewicz VP of Human Resources. She had been Director of Human Resources for the Intimate Apparel Group of Warnaco, and prior to that held human resources positions for companies Gianni Versace USA, Saks Fifth Avenue, Limited Express, and Macy's.

To see the latest listing of job openings offered 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*: 21.93 ... Change**: +0.25
Hancock Fabrics (HKF). Last*: 3.20 ... Change**: +0.24
Jo-Ann Stores (JAS). Last*: 18.03 ... Change**: +0.31
Wal-Mart (WMT). Last*: 47.59 ... Change**: +0.06
CLN Retail Index. Last*: 73.46 ... Change**: +1.0%
Dow Jones Index. Last*: 12,342.56 ... Change**: +3.0%

Two doctors and an HMO manager died and lined up at the pearly gates for admission to heaven. St. Peter asked them to identify themselves.

One doctor stepped forward and said, "I was a pediatric spine surgeon and helped kids overcome their deformities." St. Peter said, "You can enter."

The second doctor said, "I was a psychiatrist. I helped people rehabilitate themselves." St. Peter also invited him in.

The third applicant stepped forward and said, "I was an HMO manager. I helped people get cost-effective health care." St. Peter said, "You can come in, too."

But as the HMO manager walked by, St. Peter added, "You can stay three days. After that, you can go to Hell."

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4. Creative Leisure News is published the first and third Mondays of each month.  Your next issue will be Monday, December 4. HAPPY THANKSGIVING! 

xxx

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