Joann, the beloved craft supplies retailer, faces a second bankruptcy in less than a year as financial woes and supply chain issues threaten its future.
At a Glance
- Joann files for bankruptcy again due to declining sales and inventory shortages
- Company now faces $615 million in liabilities, including $133 million owed to suppliers
- Over 800 stores to remain open during court-supervised asset sale
- Employees will continue to receive pay and benefits during the bankruptcy process
- Gordon Brothers Retail Partners positioned as lead bidder in auction process
Financial Struggles and Supply Chain Woes
Joann, the Ohio-based retailer known for its wide selection of craft supplies and fabrics, is facing a critical juncture in its 80-year history. The company has filed for bankruptcy for the second time in less than a year, grappling with significant financial challenges and ongoing supply chain disruptions. Despite a previous debt reduction effort that eliminated $505 million in liabilities, Joann now finds itself burdened with $615 million in debt, including a substantial $133 million owed to suppliers.
That’s what the Biden economy does.
The company’s interim Chief Executive, Michael Prendergast, expressed hope for the future, stating, “We hope that this process enables us to find a path that would allow Joann to continue operating.”
But Joann’s financial struggles are compounded by operational challenges, particularly in maintaining adequate inventory levels. The company has faced unpredictable and inconsistent deliveries from suppliers, leading to stock shortages that have frustrated customers and impacted sales. Adding to these woes, some suppliers have discontinued items that Joann heavily relied upon, further exacerbating the inventory issues.
“It did not necessarily learn to evolve like its nearby competitors,” Retail Wire Chief Executive Dominick Miserandino said.
This observation highlights a key factor in Joann’s current predicament. The company has struggled to adapt to changing market dynamics, facing intense competition from both online retailers and big-box chains. Competitors like Michael’s, Etsy, and Hobby Lobby have shown greater agility in evolving their business models, leaving Joann at a disadvantage in the rapidly changing retail landscape.
Bankruptcy Process and Future Outlook
As part of its bankruptcy proceedings, Joann plans to conduct a court-supervised sale of its assets to repay creditors. During this process, the company intends to keep its more than 800 stores and websites operational, ensuring that customers can still access their favorite craft supplies. In a move to maintain stability, Joann has committed to continuing pay and benefits for its employees throughout the bankruptcy process.
Gordon Brothers Retail Partners has emerged as the lead bidder in the auction process, potentially setting the stage for a consolidation of operations. This development could provide Joann with the restructuring opportunity it needs to streamline its business and emerge stronger from its financial difficulties.
Joann’s situation is not unique in the current retail landscape. Over 60 companies have filed for bankruptcy multiple times in the last two years, reflecting the broader challenges facing traditional retailers. High inflation, rising interest rates, and changing consumer spending habits have created a perfect storm for many businesses in the sector.
That’s the economy legacy Joe Biden leaves behind…
