The Company, together with its subsidiaries, is the largest arts and crafts
specialty retailer in North America (based on store count) providing materials,
project ideas and education for creative activities. Our mission is to inspire
and enable customer creativity, create a fun and rewarding place to work, foster
meaningful connections with our communities and lead the industry in growth
and innovation. With crafting classes, store events, project sheets, store displays,
mobile applications and online videos, we offer a shopping experience that can
inspire creativity and confidence in our customers’ artistic abilities.
We currently own and operate a vertically integrated framing operation, leveraging
Artistree, our wholly-owned manufacturing subsidiary, across our Michaels and
Aaron Brothers store networks. Artistree supplies precut mats and high quality
custom framing merchandise. We believe Artistree provides a competitive advantage
to our Michaels and Aaron Brothers stores and gives us quality control over
the entire process.
Our moulding manufacturing plant, located in Kernersville, North Carolina, converts
lumber into finished frame moulding and supplies the moulding to our regional
processing centers for custom framing orders for our stores. We manufacture
approximately 35% of the moulding we process, import approximately 45% from
quality manufacturers in Indonesia, Malaysia, China and Italy, and purchase
the balance from distributors. We directly source metal moulding for processing
in our regional centers. The custom framing orders are processed (frames cut
and joined, along with cutting mats and foamboard backing) and shipped to our
stores where the custom frame order is completed for customer pick-up.
We operated four regional processing centers in City of Industry, California;
Coppell, Texas; Kernersville, North Carolina; and Mississauga, Ontario. Our
precut mats and custom frame supplies are packaged and distributed out of our
Coppell regional processing center.
We have a product development and sourcing design team focused on quality,
innovation and cost mitigation. Our infrastructure and internal product development
and global sourcing teams position us to continue delivering a differentiated
level of innovation, quality and value to our customers. Our global sourcing
network allows us to control new product introductions, maintain quality standards,
monitor delivery times, and manage product costs and inventory levels in order
to enhance profitability.
We continue to search for ways to leverage our position as a market leader by
establishing strategic partnerships and exclusive product relationships to provide
our customers with exciting merchandise. We have partnerships with popular brands
such as Wilton, Crayola and Isaac Mizrahi. We will continue to explore opportunities
to form future partnerships and exclusive product associations. In fiscal 2014,
we launched our e-commerce platform to complement our existing web and mobile
platforms.
Aaron Brothers. Each Aaron Brothers store offers approximately 6,000 SKUs, including
photo frames, a full line of ready-made frames, art prints, framed art, art
supplies and custom framing services. The merchandising strategy for our Aaron
Brothers stores is to provide a unique, upscale framing assortment in an appealing
environment with attentive customer service.
According to the Craft & Hobby Association (“CHA”), approximately
55% of U.S. households participated in at least one crafting project during
2012, which represented over 62 million households. Additionally, these households
purchased crafting supplies, on average, 1.9 times per month and reported participating
in approximately three crafting categories during the year. We believe the broad,
multi-generational appeal, high personal attachment and the low-cost, project-based
nature of crafting creates a loyal, resilient following. This is supported by
CHA findings that nearly half of crafters reported being a crafter for 10 or
more years.
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