500 University Court
The highest priority of management and the board of directors is to create value for shareholders. However, at A.C. Moore we believe that the way to deliver value to shareholders is to deliver it to our customers first. One way we accomplish this objective is with a relentless focus on our customers and meeting their needs with our wide assortment of products and services.
A.C. Moore Arts & Crafts, Inc. is a retailer offering a vast assortment of arts and crafts merchandise, including silk and dried flowers, floral arrangements and accessories, wedding supplies, candles and scents, wicker, stitchery, yarn, unfinished wood products, children's crafts, art supplies, picture frames, stamps and stationery, seasonal items, and fashion crafts (clothing and accessories for decoration and jewelry-making components). Its policy of beating any competitor's advertised price by ten percent is clearly displayed in all its stores; in addition, it offers selected merchandise at discounts of 20 to 40 percent on a weekly basis. A.C. Moore operates 37 stores in the mid-Atlantic and New England states.
A.C. Moore: 1995--97
A.C. Moore was founded by John E. (Jack) Parker, a veteran merchandising executive for F.W. Woolworth, and William Kaplan, a longtime manufacturer of women's handbags. The company opened its first store in 1985 and had 12 stores in 1993, when it lost $225,000 on net sales of $62.5 million after distributing $4 million to shareholders. A.C. Moore's number of stores grew to 16 in 1994, when it had net income of $4.6 million on net sales of $86.4 million. Net income grew to $6.4 million on sales of $100.1 million in 1995, despite no increase in the number of stores. (A.C. Moore's pro forma net income was significantly lower, reflecting adjustment for federal taxation and state on the individual returns of the shareholders rather than on the company before it became a public corporation.)
In 1995 A.C. Moore implemented a plan to build its infrastructure to position the company for rapid future growth. It opened only one store in 1996, but it also leased a new 140,000-square-foot distribution center and office complex in Blackwood, New Jersey, and developed an automated ordering system to electronically link the company with most vendors. A.C. Moore also recruited experienced senior retail executives in the areas of operations, merchandising, and finance and made key additions in other areas, such as buying, information systems, human resources, and real estate. Net income was $6.3 million on sales of $109.3 million in 1996.
A.C. Moore opened eight new stores in 1997. Sales increased to $138.1 million, but net income fell to $4 million, probably because new stores, according to the company, do not on average generate the volume levels of older stores. After reincorporating as a holding company, A.C. Moore completed an initial public offering in October 1997 by issuing 3.1 million shares of common stock at $15 a share and received $42.6 million in net proceeds. The company retired all outstanding bank debt and shareholder loans totaling $28 million. Its long-term debt of $17.7 million at the end of 1996 fell to zero.
A.C. Moore in the Late 1990s
A.C. Moore opened 12 more new stores in 1998 and expanded its distribution center from 120,000 to 250,000 square feet to provide additional space to support the expanding store base. Net income was $3.9 million on net sales of $187 million. The company planned to open at least 18 stores in 1999 and 2000, targeting both existing and new markets within about a 400-mile radius of its southern New Jersey distribution center.
A.C. Moore was described as a shopping destination for baby boomer parents who wanted their children to do something more active than watching television or playing video games on a computer. Chris Reidy of the Boston Globe noted that the chain claimed "to be the one-stop-shopping destination for shoppers who want to design their own T-shirts or buy enough glued Popsicle sticks to keep a pack of unruly Cub Scouts occupied on a rainy afternoon." According to a company executive, some 90 percent of the shoppers in the chain's Framingham, Massachusetts store were women, including professionals who had turned to arts and crafts as a way to relieve stress. Features of this store included what the reporter described as "all the paraphernalia a handy dad needs to build his daughter a dollhouse large enough to shelter a German shepherd" and staffers able to "Dick-and-Jane the intricacies of the home-decorating arts to even an ignoramus of macrame."
A.C. Moore was operating 37 stores, all on leased property, as it entered 1999. Nine were in Pennsylvania, eight in New York, seven in New Jersey, six in Massachusetts, two in Delaware, two in Maryland, and one each in Connecticut, New Hampshire, and Rhode Island. They were typically located in strip shopping centers with convenient parking and were easily accessible from main traffic arteries. The prototype stores ranged in size from 20,000 to 25,000 square feet, with about 80 percent devoted to selling space.
A.C. Moore stores had 26 merchandise areas. Generally, the center contained the floral area, which included a counter for floral arrangement and a ribbon center. The stores also included a customer service area, eight to ten checkout registers, and a room for craft classes.
Each A.C. Moore had a store manager, three associate managers, and a staff of up to 60 full-time and part-time sales associates. Store personnel, many of them arts-and-crafts enthusiasts, assisted customers with merchandise selection and project ideas. The classroom was being used as often as seven days a week for classes for adults and children on a wide variety of craft skills. Typical classes provided instruction in oil painting, cake decorating, advanced stamping, and on making bows, children's beaded necklaces, and memory albums. They were free of charge unless there was an extensive use of materials. The instructors were both sales associates and outside professionals.
A.C. Moore's store sites were being selected on the basis of such factors as location, demographics, anchor and other tenants, parking, and available lease terms. Within a shopping center, the company looked for tenants generating a high rate of shopping traffic, such as specialty value-oriented women's retailers, leading chain supermarkets, discount chains, home improvement centers, and book and domestic superstores.
A typical A.C. Moore store was offering about 65,000 stockkeeping units during the course of a year, with more than 45,000 offered at any one time. The floral-and-accessory category included a wide, seasonally changing assortment of high-quality silk flowers, hand-wrapped flowers, potted plants, green and flowering bushes, dried flowers, assorted mosses, wreaths, containers, and other components to create floral displays. The company's floral designers worked with customers to make any arrangement, free of charge, from silk or dried flowers purchased from the company. A large assortment of pre-made arrangements also was available. This category also included wedding supplies, items used for christenings and baby showers, packaged scents, candles and supplies for making candles, and a wide assortment of wicker baskets. Florals and accessories accounted for 27 percent of the company's net sales in 1998.
The traditional crafts category included a broad range of stitchery kits; yarn; a full assortment of hooks, needles, and other accessories; a wide variety of unfinished wood products; cake- and candy-making supplies; miniatures, including dollhouses and dollhouse furnishings; paraphernalia for making dolls and clothing for dolls, as well as teddy bears and other stuffed animals; children's crafts, including sand art, sidewalk chalk, bead art supplies, children's stitchery kits, and coloring and other books; felt, glitter, and other materials used in the creation of craft projects; and a wide range of books to assist crafters in all categories. Traditional crafts accounted for about 30 percent of A.C. Moore's sales in 1998.
The art supplies and frame category included oil, acrylic, and water-based paints and other art supplies, such as pastels, brushes, drawing pencils, markers, tablets, and art palettes. It also included decorative stamps and stamp pads, fashion stickers, embossing tools, and albums, stencils, and picture frames of all types and sizes. This category accounted for about 28 percent of company sales in 1998.
Fashion crafts consisted of adult and children's T-shirts and sweatshirts to be decorated with fabric art; related accessories; transfers, including pictures to be ironed or sewn on clothing, most of which could be further embellished with glitter and fabric paints; and jewelry-making components, such as beads, sequins, and rhinestones, as well as the tools needed to complete the project. Fashion crafts accounted for about seven percent of company sales in 1998.
Seasonal items included a wide range of merchandise used as decoration for all major holidays and seasons. In addition to Christmas and Easter, holidays resulting in significant sales of seasonal merchandise included Valentine's Day, St. Patrick's Day, and Halloween. Seasonal items accounted for about eight percent of company sales in 1998.
A.C. Moore was purchasing its inventory from more than 500 vendors worldwide. SBAR, Inc. was the leading supplier in 1998, accounting for about 19 percent of the dollar volume of the company's purchases. About 11 percent of its dollar volume, primarily floral and seasonal items, was imported directly from foreign manufacturers or their agents, principally in the Far East. About 57 percent of all merchandise orders were shipped directly from the vendor to the stores. The remaining 43 percent, of which more than 35 percent were floral and seasonal items, were shipped to the stores from the company's distribution center.
Jack Parker, A.C. Moore's president and chief executive officer, and his wife, Patricia, held 27 percent of A.C. Moore's stock during 1999. William Kaplan, the chairman, held 26 percent.
Principal Subsidiaries: A.C. Moore Incorporated; Blackwood Assets, Inc.; Moorestown Finance, Inc.
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