A.C. Moore finishes first half in strength

Rick Lepley faced a challenge: How to get stingy customers to spend during the recession while still streamlining operations at A.C. Moore Arts & Crafts Inc.

Lepley, the chief executive officer of the Berlin retailer, took steps to make the business more efficient, helping to boost its stock price 169 percent so far this year. That made A.C. Moore the biggest gainer in the first half of 2009 among local stocks that ended at $3 per share or higher.

First, he closed nine stores in 2008, leaving the total now at 133. He cut in places such as Alabama, where the outlets were far from the warehouse in the company's Camden County base. That made those stores costly to run.

To avoid losing sales by running out of merchandise, Lepley installed software that tells workers when to order and how much at each store.

While that project won't be finished until 2010, it's likely to pay dividends that will help the company return to profitability after five straight quarters of losses totaling $31 million. When rival Michaels Stores Inc. made similar inventory-tracking changes in 2004, they improved sales and profitability, said analyst Holly Guthrie at Boenning & Scattergood Inc. in West Conshohocken.

Lepley hired Michaels Stores veteran David Abelman in May as A.C. Moore's chief marketing and merchandising officer. Abelman brings "great expertise," Guthrie said, noting the stock market's apparent approval of A.C. Moore management.

To win over customers, Lepley is offering more items for the frugal, such as those planning their own weddings.

He's also added products like model trains and hobby crafts, since he thinks parents don't cut back as much on their children as they do on themselves. And A.C. Moore is offering cake- and candy-making goods, targeting families that are eating at home more often in tough economic times.

"All we have to do is get people back into the shopping centers," Lepley says. "We're not the only retailer that would like to see that happen quickly."