For the BB Obsessed

Tim Hayes.

SGF, Supreme Grumble Framer
Joined
Aug 31, 2001
Posts
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Loc
Virginia
Michaels' Q4 Comps Up 4%
February 3, 2006
By Jennifer D. Duell

IRVING, TX-Michaels Stores Inc. has achieved sales of $3.676 billion for fiscal 2005, representing an increase of 8.3% from $3.393 billion in fiscal 2004. Same-store sales for fiscal 2005 were up 3.6% on top of last year's 6.7% increase, despite the softening demand for yarn.

The increase in comp store sales increase for the fiscal year were driven by a .5% increase in transactions, a 2.7% increase in average ticket and a .4% increase in custom frame deliveries.

"We expect fiscal 2005 to be our ninth year of record operating results with industry leading financial returns," said President and CEO Michael Rouleau in a company statement.

For the fourth quarter total sales were $1.270 billion, a 7.2% increase over last year's fourth quarter sales of $1.185 billion. Same-store sales for the quarter increased 2.4% on a 2.2% increase in average ticket and a .2% increase in transactions. A favorable Canadian currency translation added approximately 0.2% to the average ticket increase for the fourth quarter and approximately 0.4% for the fiscal year.

Same-store sales for the fourth quarter were strongest in the Southeast, Southwest and Pacific regions of the country, according to the chain, which operates 891 Michaels stores in 48 states and Canada, 166 Aaron Brothers stores, 11 Recollections stores and four Star Wholesale operations. The best performing categories included jewelry and beads, candles, bakeware, kids' crafts, art and frames.

Rouleau contends that the chain is "well-positioned" to expand its market share during fiscal 2006. However, Michaels is expecting consumer interest in fashion yarn to dampen comparable store sales during the first quarter of fiscal 2006. The company plans to release its fourth quarter fiscal 2005 earnings in March 2006.
 
"...and a .4% increase in custom frame deliveries." .4 isn't much, is it?

Don't let the numbers fool you. When I left there in December, Custom Framing sales, company-wide, were down 3% and had been for quite awhlie.

4 of my customers yesterday were "ex"-Michaels customers, despite another 50% sale there this week. 2 others said they've never been there and wouldn't. They all said they didn't care anymore about the sales, they preferred the customer service and personal touch I can offer. One woman went there to find me and was told I have my own shop now. She came in with 6 X-stitches and chose expensive mouldings.
I'm not concerned. After only one month, I have as much work as I can handle already, and have taken on help, and looking ahead at how to handle more. The BB's may end up being our best resource in the long run, as long as we keep up what we all do best....fine framing and excellant customer service, and with that wonderful sense of humor you all have.
I'm not bashing them, mind you. My friends there have referred several people to me already to do things they can't (restorations/repairs, wide frames, etc.)Go in to yours, introduce yourself to them and tell them what you do that they can't.they may not know. Give them a stack of your business cards. They hate turning people away with "Gee, I don't know who does that around here". Once they get in your door, chances are, you'll keep them there!
We've done this thread before. I'm just saying don't be too concerned by the numbers. They know how to tweak them to make them look better than they actually are. Custom Framing, despite what they say, is not Michael's strong suit. It is ours.
Keep up the great work, everyone!
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I don't believe that they have a strong history of these releases matching official numbers.
 
I was going to start buying Michael's stock in 2000 and 2001 so I was looking into them. I decided against it. I remembered reading about this with much interest sometime later...

MICHAELS STORES: Bernstein Liebhard Launches Securities Suit in N.D. TX
-----------------------------------------------------------------------
Bernstein Liebhard & Lifshitz, LLP initiated a securities class action
on behalf of all persons who acquired securities of Michaels Stores,
Inc. (NYSE: MIK) between August 8, 2002 and November 7, 2002,
inclusive. The case is pending in the United States District Court for
the Northern District of Texas, Dallas Division against the Company
and:

(1) R. Michael Rouleau,
(2) Bryan M. DeCordova,
(3) Duane E. Hiemenz,
(4) Richard C. Marcus,
(5) Thomas C. Decaro,
(6) James F. Tucker,
(7) Edward F. Sadler, and
(8) Robert M. Spencer.

The Complaint charges that Defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market during the Class Period, thereby artificially inflating the
price of Michaels Stores securities. Specifically, the Complaint
alleges that throughout the Class Period, Defendants repeatedly
represented that Michaels Stores' financial condition was strong and
that the Company was increasing its market share. Defendants also
consistently made positive statements about Michaels Stores that
conditioned investors to believe that:

(i) as a result of Michaels Stores' unique combination of assets
and market condition, the Company was poised to continue
growth and acceleration of market share, despite, or rather as
a result of, very difficult market conditions;

(ii) despite market conditions that were resulting in downward
revisions at Michaels Stores' competitors, the Company was not
in danger of failing to meet Company-sponsored expectations
for revenue growth; and

(iii) the Company's phenomenal second quarter 2002 results were
caused by Michaels Stores' strong operating performance. What
investors did not know, was that Defendants had been able to
achieve a 359% increase in net income by fully utilizing a
$14.8 million "markdown reserve" without disclosing it at the
time it was taken. In addition to concealing the fact that the
reversal of markdown reserves padded the Company's second
quarter 2002 results, Defendants also concealed that the
Company was suffering from a host of undisclosed adverse
factors which were negatively impacting its business.

The truth was revealed on November 7, 2002, when Defendants disclosed
for the first time that the Company was operating well below guidance,
that Michaels Stores would substantially reduce estimates going
forward, and that Michaels Stores were experiencing the same adverse
market conditions which were negatively impacting the Company's
competitors. Immediately following the publication of this release, as
soon as trading of Michaels Stores began, shares plummeted over 30%, or
over $11.18 per share, more than wiping out all gains made during the
Class Period.
http://bankrupt.com/CAR_Public/030331.mbx
 
THAT, my friend, is the funniest thing I've read on chatboards in quite some time! Hey, they were just applying their framing pricing model to their whole company!
 
I think rather than saying "3.676 billion" we should write it out.

It would look like 3,676,000,000. Michaels and Aaron Brothers has about 1000 units. 3,676,000 per store. Now what percentage of that do you think comes from their framing departments?

I find it very hard to believe it would be less than 20%.

How many of these do you have around you? That’s a ton of framing that YOU are not getting?

I'm sorry Val but I concerned less by the odd customers to sings my praises as I am the overwhelming majority that is all to happy to give each store $735,000 in framing each year. You would have to do an awful mess x-stitches more than that to make a dent. Oh but the glory if you could make a dent!!!!!

We are all welcome to our opinion and who really thinks “But I’m a really great framer” is going to make much of a dent? I do expect us to be better but I’m not a customer. Even if your customers believe that you are better, why aren’t we all doing $735,000/year?
 
Originally posted by Val:
"...and a .4% increase in custom frame deliveries." .4 isn't much, is it?

Don't let the numbers fool you. When I left there in December, Custom Framing sales, company-wide, were down 3% and had been for quite awhlie...
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Just one more opinion:

Small shop framers might take that to mean they are re-gaining market share lost to the craft stores in recent years. Not likely.

As our industry's evolution continues, production type "wall decor" may be the fastest-growing category. A lot of it comes from China, Korea, and Brazil, as well as Mexico and southern USA factories.

With that, the hum-drum framing numbers for craft stores may mean that they, too, are losing business to non-framing retail outlets such as Bed bath & Beyond, Wal-Mart, and most department stores. I predict that soon, CVS and Walgreens will have a price war on pre-framed art.

There will always be a market for good-better-best quality custom framing, but that segment of our industry is presently shrinking, not growing, in competition with pre-framed art.
 
I think in large that is true Jim. There are still holes in that idea.

When Wallgreens and Bed Bath & Beyond orders art, they get a huge box of crap. I don't see much depth in their offerings. They all carry the same old selection.

From store to store they may battle on price cannot touch you on selection.

I'm not talking about stocking the entire Image Conscious catalog either. I'm just saying you can hit on the few images that Walgreens sells the first day. You can inventory those images that your particular customer responds well too.

This Christmas I had about 4 that I drymounted in bulk and would just reframe and rehang when they sold. This year they were the men on the beam, anything Marilyn, and horses. This is Kentucky after all.

If CVS even had marlyn or horses (they don't because their selection isn't that broad to begin with) they sold right away and couldn't replace THAT image. Here the images that would linger at CVS isn't polluting the good stuff. The good stuff is always available.

Because of CVS I can't just name my price but I can buy well and get close to their price points often. I think customers do expect a bit of a price premium for that selection.

I find the topic of preframed art as fascinating as anything. I would just love to see Bob and Bill square off on this.

You could easily mix walk-in traffic into this topic. Many shops probably don’t have the eyeballs to justify any selection of art.
 
Originally posted by Jay H:
...Because of CVS I can't just name my price but I can buy well and get close to their price points often. I think customers do expect a bit of a price premium for that selection...
Good points, Jay, and I think we're on the same page.

But is actual price as big an issue as we think it is? I think the main issue is consumers' perception that the chain stores have a better price. The real truth of pricing becomes moot if they find what they are looking for at CVS before they find us.

Yes, selection is worth a premium price, when selection is indeed an issue. Our work will always appeal to those who are looking for what they perceive to be "perfect for me" images and framing. However, my feeling is that those discriminating consumers are diminishing in number.

For the many consumers who respond to marketing and advertising, "acceptable at a lower price right here and now" is taking precedence over "perfect at a perceived-bigger investment of money and time to find it".

Maybe our Big Challenge is finding a way to reverse the current consumer buying trend without a million-dollar-a-month national advertising budget.
 
My good friend, Jim, makes a common (and I am uncomfortable saying) mistake that most in our trade when he suggests that the BIG CHALLENGE is to reverse the trend (any trend). We might have a better opportunity attempting to get Madonna to practice celibacy.

It is infinitely easier to adapt to the marketplace than to attempt to get the marketplace to adapt to us.

There will always be a segment (there is that word again) that will always feel price is a motivating consideration just as there will always be those that are less "motivated" by same.

Absent any meaningful data (and there is that word again), I have to rely upon anecdotal evidence. To many framers that seems to be our own (outdated) perceptions. To me, it is more in line with watching the big boys (with huge staffs to monitor and analyze the same)and seeing where I might be able to hitch a free "marketing" ride

What is that great analogy William Parker uses about the great white shark and all the little sea creatures that jump on the back and swim for free?

We can, and should, learn from all competitors. And, it's never more true than with those really good and really successful ones
 
Originally posted by Bob Carter:
My good friend, Jim, makes a common (and I am uncomfortable saying) mistake that most in our trade when he suggests that the BIG CHALLENGE is to reverse the trend (any trend). We might have a better opportunity attempting to get Madonna to practice celibacy.

It is infinitely easier to adapt to the marketplace than to attempt to get the marketplace to adapt to us...
Geez, Bob, did you think I was serious about changing the consumer buying trend? Thank you for reinforcing my tongue-in-cheek comment: "Maybe our Big Challenge is finding a way to reverse the current consumer buying trend without a million-dollar-a-month national advertising budget." That would be "Big Challenge" as in "Fat Chance".

We agree it would be a mistake to think we could do that. Do you think any small business owner has such visions? Who among us has a million-dollar-a-month national advertising budget? Shucks, mine is considerably less than half of that amount. OK, it's way less than 1% of that amount. :rolleyes:

And yes, we agree that adapting to the market is the proven way for small-business players to progress. Adapting is something we can do better than our larger competitors -- we can turn our businesses on a dime (when we are so inclined); they can't.

The consumer buying trend is worthy of more discussion, I think. As we adapt to local market forces, we need to realize that the trend is in a state of constant flux. That is, it continually changes -- sometimes quickly.

For example, in 1999 there were at least 50% more small-shop framers than there are today -- and the trend indicates that by 2010, we may number fewer than 8,000 in the USA.

In 1999 a lot of us sold a lot of print art. Small galleries were the primary source if it in the USA. But today, more of it is sold online, and less of it in retail storefronts like ours.

Also, most of us did not have cell phones 15 years ago, or home computers just a decade ago. But today, we would be hard pressed to find anyone who does not use a computer or cell phone every day. Maybe by 1010, we will talk on computer/video-streaming wristwatches. Trends change.

So, where is the consumer buying trend headed regarding art/custom framing/wall decor? I will speculate that within ten years Wal-Mart, et al, will have reached its peak. The trend toward ever-bigger and more-inclusive stores may begin to decline, as new competitive forces -- or changing lifestyles -- attract consumers elsewhere.

My baby-boomer neighbors and I talk about how we like to buy groceries at the smaller markets. Gail and I rarely shop at Wal-Mart, and Kroger stores are getting too big, too. We favor closer parking and the faster-in-and-out experience of smaller stores. Will grocery stores like Trader Joe's and Wild Oats be our super markets of the future?

Will that concept of personal service and convenience transfer to our industry -- I mean in a big enough way to change our industry? If so, how would we adapt to the trend? Would we have more of those mobile frame design galleries in trucks or vans? Would we have more elaborate frame design capabilities online for our local customers, via our web sites, and then deliver & hang the finished work?

Crystal-ball gazing is a good thing, but we need to keep it in perspective, right Bob?

PS: Bob, your Madonna suggestion is intriguing. I'll give her a call tomorrow and see what we can work out.
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Thanks for clearing that up, Jim. Unfortunately, I am certain there are those that do feel we can "educate our customers" to our way of thinking. I'm sure some will be candidates, but, sadly it is an uphill battle.

I do have to take exception with Rick suggesting that advancing age and time have a connection with celibacy because I'm not getting any younger

But, Jim, if we call Madonna she just might make an exception on that celibacy deal pertaining to you and I
 
Jim, I agree with your observation about shopping experiences. We love Trader Joe's, not only because they carry interesting items not found in the supermarket, but also because of the more intimate shopping experience, and the knowledgeable and enthusiastic employees. Of course the $3.50 Charles Shaw wines don't hurt either. We used to make "Trader Joe's Runs" up to Kettering (about 45 min. away), but now we have a TJ's about 1.5 miles from where we live.
For things beyond what TJ's carries we like to support our local IGA store (which is excellent). We rarely shop at Kroger's anymore.
:cool: Rick
P.S. Bob, in Madonna's case (and yours too, I'm sure) I was talking in terms of getting up into the 80's and 90's.
 
Oh no, Rick, it's already the 2000's now. The 80's and 90's were awfully good to me. Don't tell me it's all in my rear view mirror now
 
OK, I've got it, instead of continually obsessing about what the big boxes are doing, and how we can compete with them, lets just merge all Grumbler framing operations into one big company. In other words, if we can't beat them, lets join them.

We can elect a board of directors, a president and CEO, pool all our resources and get payed by shares. For example, say Bobs Arizona operations are appraised at two or so million and mine is appraised at say two hundred thousand, Ricks is a million or so, etc.

Whatever the value of your business is, that would be your stake in the new, mega, big box operation. That would be divided into percentages to determine your monthly take. We could standardize our advertising, pool our purchasing, go public to raise expansion capital, etc. Our officers would be voted in, just like any corporation, the rest of us would be managers or grunts, whatever would make us happy.

Some shops could be liquidated and merged into bigger shops. We could collectively give the existing big boxes a huge run for their money.

Howz that for a great idea?

Probably been already thought of and I just missed it.

John
 
The trend toward ever-bigger and more-inclusive stores may begin to decline, as new competitive forces -- or changing lifestyles -- attract consumers elsewhere.
I have a theory - change based on technology (cell phone, pc's) are linear in nature, they do not go backwards; change based on social behavior are cyclical in nature, with a reactive/balancing component.

I consider BB/WalMart type trends to be based on ideas of what people want. And while they are driven by technology, they are based on feelings and behavior of the public, much of which are financial and time issues. And those things are subject to change, by the very forces that made them possible in the first place.

What is my point? Not sure, . . . yet. Just talking outloud. :D
 
The big boxes give the public what they want and they give it at the price they want. What that means is, a price lower than what we can sell it for.

For you older Grumblers, I'm sure you can remember an office supply store in just about every neighborhood. You could go in and ask for just about anything, and if they did not have it, they would get it for you, in usually just a few days.

Ever go into staples and ask for something hard to find?

We, the buying public, have gladly given up the small, full service neighborhood stores and shops, for the lower priced, marginal service, mega stores. It is all about money, not service, not even quality.

The public wants their pictures framed as cheap as possible. Most think a framing job should cost what a framed print cost at Woolworth's back in the 1950s.

My guess is that the small custom framing shop attracts less than five percent of the people in their neighborhoods. I would also be so bold as to guess that even that number is dwindling.

Their will always be a small amount of business for a small custom framing shop, don't ever think you are going to get rich from owning one though. If you are lucky and put out an exceptional product and have great charisma with your customers, the best you can hope for is to earn an average, private sector living.

If you plan on doing better than that, you better listen to Bob Carter and others like him.

John
 
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