Crafty Retailer

August 23, 2010 | 8:00 am ET Staff Reporter

With 70% of GDP in the US coming from retail sales, Irving-based Michael's CEO John Menzer says the Great Recession has changed everything in the retail world. He spoke Thursday at the Greater Irving-Las Colinas Chamber of Commerce state of retail event at the Westin DFW Hotel North. He says Michael's (the nation's largest arts and crafts supply retailer-1k stores in the US and Canada) strategy of selecting complementary real estate locations didn't work out as planned (it was setting up next to the now-defunct Linens 'n Things). He anticipates more retailers will close after this holiday season. While 2010 will be slightly better than last year, he says retailers "feel less bad, but we don't feel good."

Michael's plans to open about 30-35 stores this year. John says he just returned from a scouting trip to San Francisco, Jacksonville,Pittsburgh, and Chicago. Now, all retailers are playing a waiting game looking at unemployment, consumer confidence, housing starts and the consumer credit outlook. While Michael's avoided smaller markets in the past, the first small-market store will open in North Carolina this year, he says. If it works, more will follow. The opportunity for real estate growth is there this year, John says. Rents have come down and Michael's is finding very good rates in new locations. More stores could open next year, too, he adds. Pictured are the Stream Realty gentleman we sat with at the event: Bill Moebius, Chase Sutton, Damian Rivera, Jamie Jennings, Chris Jackson, and Lance Taylor.

In addition to the traditional strip-center store, the chain is opening urban stores like one four blocks from Wrigley Field as well as a Manhattan store last fall. The chain had record sales in Q1 with a 4.9 % increase in same-store sales and a 64% improvement of operating income to $105M. Moody's upgraded Michael's credit rating, too. John is looking at industry trends including the growing Hispanic customer population. He says the 2010 Census projections show that one in every six US residents will be Hispanic, an increase of 42% from the 2000 census. He says it's analogous to the Baby Boomers coming of age. "We're adapting merchandise, signage, and services for this very important customer," he says.

Crafty Retailer

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