Joann, the 81-year-old fabric and craft retailer, has filed for bankruptcy as it struggles with customers cutting back on discretionary spending. In a statement released on Monday, the Ohio-based company said it filed for Chapter 11 bankruptcy protection and has secured $132 million in funding with most of its financial stakeholders that helps reduce its debt in half, which had increased to $1 billion. Joann’s 850 stores and website will continue to operate, and obligations to employees, vendors, landlords and other trade creditors will be paid.
“This agreement is a significant step forward in addressing Joann’s capital structure needs, and it will provide us with the financial resources and flexibility necessary to continue to deliver best-in-class product assortments and enhance the customer experience wherever they’re shopping with us,” said Scott Sekella, Joann’s CFO, in the company statement.
Joann’s stock was delisted from Nasdaq and the retailer will become privately owned following the bankruptcy process, which it expects to happen as quickly as next month.
Total Retail’s Take: Joann’s revenue had been on the decline in recent years, except for a pandemic boom when people stuck at home spent more money on arts and crafts and other hobbies to keep them busy. However, that boom has since faded, and inflation has soared, prompting customers to spend less on nonessential items. In addition, those customers that are interested in arts and crafts are increasingly shopping at lower-priced rivals, like Hobby Lobby, because of weakening store standards and declining customer service levels due to staffing cuts. Retail insiders have been watching Joann for a while in anticipation of a bankruptcy filing. Yet despite the current challenges facing Joann, the bankruptcy filing could position it for a better future. The infusion of cash from private investors will enable Joann to streamline its operations and reduce debt levels, leading to a healthier financial status.
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