Joann, the 81-year-old fabric and craft retailer, announced Monday that it filed for Chapter 11 bankruptcy protection.
In a statement, the Ohio-based company said a restructuring deal was made with a majority of its financial stakeholders and other financing parties, who together pledged $132 million in new funding to help reduce Joann’s debt to approximately $505 million.
The parties also agreed to a six-month extension of certain loans and credit facilities, allowing the company to fulfill its financial obligations to employees, vendors, landlords, and other trade creditors.
For now, all of Joann’s 829 stores will remain open for business, as will its online store, the company statement said.
“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 are shopping with us,” said chief financial officer Scott Sekella. He added that 95 percent of Joann’s stores are cash flow positive today.
Like many of its competitors, Joann’s revenue has been on the decline for the last several years. Sales spiked for a while when lockdowns and social distancing kept many people stuck at home, looking for ways to spend the time. However, sales have dropped since.
With relatively high interest rates and soaring inflation, many households are forced to cut back on non-essential purchases. Joann’s debt had ballooned to $1 billion by March this year.
Joann’s stock was delisted from the Nasdaq and will now become a privately owned company after court approval, which could be as early as late April 2024, the company said.
“The bankruptcy of Joann has been looming for a long time and was always a matter of when, rather than if,” Neil Saunders, managing director and retail analyst for GlobalData, told CNN.
Mr. Saunders attributed Joann’s falling revenue to “weakening store standards and declining customer service levels, partly because of staffing cuts,” driving consumers to lower-price competitors.
However, external factors may be at play. According to a report from S&P Global, U.S. bankruptcies hit a 13-year peak in 2023, with the sector leading in bankruptcy filings being the consumer discretionary businesses, followed closely by healthcare and industrial companies.
Chris DiTullio, chief customer officer, expressed his confidence in the company’s brand and the opportunities for long-term growth offered by the deal.
“There is no other retailer with the same ability to serve sewists, quilters, crocheters, crafters and other creative enthusiasts as we have for the past 80 years, and we take great pride in seeing the passion and engagement of our millions of customers and our Team Members.”
Joann opened in 1943 as a fabric shop in Cleveland, Ohio, and was established by three German immigrant couples—the families Reich, Rohrbach, and Zimmerman. In 1969, the company became a publicly held corporation as it joined the American Stock Exchange, and in March 2021 went public on the Nasdaq market.
