- The Washington Times - Saturday, October 20, 2001

Want a sign of life in this economy? Look no further than the Halloween costume you or your neighbor just made.

Arts and crafts stores are proving to be a bastion of resiliency amid a moribund economy plagued by declining consumer confidence.

In the wake of the Sept. 11 terrorist attacks, airlines, restaurants, theme parks and vacation spots are hurting as folks "nest" at home to watch television, rent videos and, yes, do arts and crafts.

"We are seeing that people are wanting to stay at home more and do more family-oriented activities," said Tom Clary, spokesman for Michael's Stores Inc. of Irving, Texas, which has about 650 stores across North America.

Even armchair psychologists can see a clear trend toward reaffirming the value of family and friends. The phenomenon was underscored yesterday by a survey from the International Mass Retail Association, which concluded that Americans are expected to spend an average of 41 percent more on Halloween products including the items to make them than last year.

Customers "have been buying a lot of stuff to do at home," said Dianne Foster, a manager at Jo-Ann Fabrics in Greenbelt.

"Traumas, in a way, guide you to rethink your values," said Dacher Keltner, a professor of social psychology at the University of California at Berkeley. "What really matters is not money, sporting events and the like, but family."

And that's great for crafts stores, said Debbie Kay, an assistant manager at Michael's in Aspen Hill. "Our whole thing is family," she said.

Michael's has 36 locations in Maryland and Virginia. The chain reported last week that sales for September climbed 18 percent from last year, with stores open at least a year increasing 10 percent. Michael's raised its third-quarter earning estimate by 3 cents to 51 cents a share.

"I think people are just trying to 'happy up,'" said Frances Brame, shopping last night at Frank's Nursery and Crafts on Route 1 in Laurel.

"America's not as happy as it used to be," Mrs. Brame said. "There's not a lot to laugh about. Every time you look on TV, they're showing those hijacked planes again.

"I think women are buying stuff to spruce up their houses and feel better," she said.

"People are definitely traveling less," said Laura Richardson, an analyst with Adams, Harkness and Hill in Boston. "This opens the door for other leisure activities."

Ms. Richardson issued "strong buy" ratings for both Michael's and Blackwood, N.J.-based A.C. Moore.

A.C. Moore, which operates 59 stores in the Eastern United States, including four in Maryland, announced that it beat analysts' estimates for its most recent quarter and increased its earnings-per-share estimate by 2 cents.

Stock analysts say the trend toward more family-oriented leisure activities is icing on the cake for arts and crafts companies, which were flourishing even before Sept. 11. They say the economic downturn has been positive for these companies because consumers are more inclined to make certain items themselves out of inexpensive products.

"A lot of [craft stores success] is due to the economy," Ms. Richardson said. "Craft retailers tend to do well during a recession because they [offer] an affordable activity."

There is still room for growth. Craft stores are in their busiest time of year, with Halloween-related materials flying off the shelves and Thanksgiving and Christmas approaching.

All of this comes on top of a post-Sept. 11 uptick in sales of American flags and red, white and blue ribbons and decorations.

"A couple of days after the terrorist attacks, we couldn't find flags or anything with a U.S.A. logo on it anywhere. It was all sold out," said Dale McKenzie, shopping last night for Halloween decorations at Frank's.

Shares of Michael's Inc. began the year trading at $24.47 on the Nasdaq Stock Market and rose to close at $42.20 Sept. 10. Since then, the company's stock has risen another $5, closing yesterday at $47.18, a 52-week high.

A.C. Moore's stock has moved just as impressively. It opened the year trading at $8.31 on the Nasdaq and rose to $14.10 Sept. 10. It closed yesterday at $18.11.

• Guy Taylor contributed to this report.

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