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May 04 , 2005

Jo-Ann has Designs on Metroplex Expansion

May 4th, 2005 - Growing arts and crafts market means competition isn’t a problem, says rival Michaels By SANDRA ZARAGOZA | STAFF WRITER As more customers become hooked on crafts, Michaels and Jo-Ann stores are positioning themselves to grow their market share in North Texas. Irving-based Michaels Stores Inc. (NYSE:MIK) is the largest chain of arts and crafts stores nationally, while Ohio-based Jo-Ann Stores Inc. (NYSE: JAS) is the second-largest. The companies, which each have 18 stores locally, go head-to-head when it comes to arts and crafts products, a growing market segment that was worth $29 billion in sales in 2002, according to a study by the Hobby Industry Association , a trade association. While both companies plan to enter new markets throughout the Metroplex and to reposition older stores, Jo-Ann Stores’ expansion is in high gear, with plans to grow by five “superstores” in the Metroplex in the next year. “They are aggressively rolling out stores in the Dallas-Fort Worth market,” said Steve Lieberman, CEO of Dallas based The Retail Connection. Lieberman says three of the five Jo-Ann superstores still in the pipeline will be new to the Metroplex area, while the other two will replace traditional stores. Eventually, long-term plans call to replace every traditional 18,000 square-foot store in the Metroplex with a new 35,000 square-foot superstore, either by conversion or by closing a traditional store to open a new one in the same trade area. Jo-Ann, he said, “is bullish on Texas and is looking at similar expansion programs in other parts of the state.” The number of households with at least one person engaged in an arts or craft hobby grew to 60% nationally in 2002, according to the New Jersey-based Hobby Industry Association. That increasing and loyal customer base is the No.1 factor powering the growth of arts and craft stores, retailers and analysts say. While Jo-Ann stores do compete against larger chains such as Michaels, arts and crafts retailing is such a fragmented industry that they also compete with a number of local operators as well as against Wal-Mart’s craft department, Lieberman said. In order to compete with the growing number of independent specialty shops, Jo-Ann stores introduced a 35,000 square-foot superstore prototype. The new superstore has several “shop-in-a-shop” departments dedicated to popular crafts like quilting, scrapbooking, flower arranging, painting and home décor. “The shop-in-a-shop format gives a neighborhood feeling that customers enjoy, “Lieberman said. Unlike Michaels, Jo-Ann stores, which reported $1.7 billion in sales in 2004, also offer fabric and high-end sewing equipment. Jo-Ann execs are open to putting superstores in freestanding locations, power centers and existing stores. They have about 97 superstores across the country. Michaels, the reigning crafts giant with about $3 billion in sales in 2004, has plans to eventually grow from 18 stores in the Metroplex to about 30. “Dallas is an excellent market for us,” said Douglas B. Sullivan, executive vice president for Michaels. The company has no immediate plans to enlarge its standard 26,000-square-foot Michaels stores, according to Sullivan.\ In addition, Michaels owns scrapbooking and paper-crafts stores called ReCollections, as well as framing and art supply stores under the name Aaron Brothers. It also operates Decorators Wholesale Warehouses -- stores that target decorating and event planning professionals and organizations.
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