Elderly Fabric and Craft Retailer, Joann, Files for Bankruptcy Amidst Declining Sales and Soaring Inflation
Joann Fabrics and Crafts, an 81-year-old retailer based in Ohio, has filed for Chapter 11 bankruptcy protection. The company announced the filing on Monday, stating that it had secured $132 million in new funding to help reduce its debt by half. This debt had accumulated to a staggering $1 billion, leaving the retailer in dire need of financial relief.
Despite the bankruptcy filing, Joann’s approximately 850 stores and its contact platform will continue to operate as usual. The company’s revenue has been on a downward trend for some time, with the exception of a brief surge during the COVID-19 pandemic when consumers spent more on arts and crafts due to lockdowns. However, this growth has since subsided, and inflationary pressures have intensified, leading customers to cut back on non-essential purchases.
In a statement, Scott Sekella, Joann’s Chief Financial Officer, expressed his optimism about the bankruptcy proceedings and their impact on the company: “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 delivering best-in-class product assortments and enhancing the customer experience wherever they are shopping with us.”
Upon completion of the bankruptcy process, Joann’s stock will be delisted from the Nasdaq and transitioned to private ownership. Neil Saunders, Managing Director and Retail Analyst at GlobalData, commented on the matter in a note on Monday: “The bankruptcy of Joann has been a long-standing concern and was more a question of when, rather than if. The bankruptcy process will now allow the arts and crafts chain to receive an infusion of cash at the same time as streamlining its operations and reducing debt levels.”
However, Saunders also highlighted a concern regarding the erosion of Joann’s market share to competitors like Hobby Lobby. He attributed this loss in part to “weakening store standards and declining customer service levels, partly due to staffing cuts, which have made stores less desirable.” As a result, customers have been gravitating towards lower-priced alternatives.
