A beloved craft and fabric store with a history of more than 80 years filed for bankruptcy Wednesday morning for the second time in two years.
And experts warn the company will now face complete bankruptcy after making a major blunder while reorganizing its operations after filing for Chapter 11 last March.
Joann, which operates in nearly every U.S. state, closed zero stores and tried to keep going — instead of cutting loss-making stores and canceling expensive leases.
That was a huge blunder and there’s a good chance the company will be bought by the same company that picked up Toys R Us and Gymboree – and all the stores will have to close.
“Joann kept all locations open after their last bankruptcy, which is the opposite of what a retailer should do.
‘You have to reject and downsize leases from unprofitable locations. They didn’t, and now they’re going to liquidate,” John Bringardner, head of Debtwire, told DailyMail.com.
He added: “Joann’s stalking horse bidder is Gordon Brothers, a well-known liquidator of retailers such as Gymboree, Toys R Us and BCBG.
“Unless Joann can find a higher bidder at a bankruptcy auction, Gordon will take control of the company and most likely end the sale, and the remaining employees will be laid off.”
Joann, which operates in nearly every U.S. state, recently closed six of its 815 stores
Meanwhile, another retail expert also said Joann’s “future now looks very uncertain.”
“When Joann emerged from bankruptcy last year, it did so with a breather rather than a complete solution to all its problems,” said Neil Saunders, managing director of GlobalData.
‘While it has reduced its debt burden, it has not eliminated it, which meant there was very little room for error in execution.
Unfortunately, Joann has fallen short on several fronts, and now she has run out of oxygen again.
Inventory issues have led to stock shortages and gaps in ranges, weakening the specialist status in fabrics and textiles and driving customer defections. The experience in many stores is also substandard, which hurts sales.
‘These things are not good enough now that the growing presence of online specialists and strong operators like Hobby Lobby is breathing down Joann’s neck.
‘With debts of $615.7 million and outstanding trade debt of $133 million, Joann had no room for the problems that have plagued her over the past year. Unless a buyer is found for the company, the future now looks very uncertain.”
Last week it emerged that Joann had recently closed six of its 815 stores, but they are all now closed.
Until 2018 it was known as Jo-Ann Stores, but rebranded as ‘Joann’ to move beyond fabrics and embrace a wider range of crafts.
The six recently closed stores are in Burlington, Iowa; Owings Mills, Maryland; Holyoke, MA; Ithaca, New York; Hickory, North Carolina; and Williamsport, PA.
Shoppers affected by the closures can get deep discounts during the liquidation sale, with discounts ranging from 50 to 90 percent at affected locations.
Joann first filed for bankruptcy in March last year after sales growth fizzled out during the pandemic, leaving the retailer with $1.2 billion in debt.
It emerged from bankruptcy the following month – with 815 stores in 49 states – after creditors agreed to forgive $505 million in debt in exchange for ownership of the company.
Sarah Foss, head of legal at Debwire, said this morning: ‘Bricks and mortar retailers like Joann are facing stiff competition from online retailers like Amazon.
“Joann joins companies like Bed Bath & Beyond, Christmas Tree Shops and Soft Surroundings, which all filed Chapter 11 cases in the past year.
“Retailers often seek Chapter 11 bankruptcy protection to restructure their operations – it gives them some bargaining power over landlords as they reduce their retail footprint and right-size their balance sheet.”
Joann is the latest retailer to face challenges after a sales boom during the pandemic. As Americans head back to work, the surge in home crafting has slowed significantly.
Home organization specialist The Container Store suffered the same fate and filed for bankruptcy last month.
Despite the closures, Joann insists it has no plans for widespread closures or bankruptcies.
Joann rebranded Jo-Ann’s in 2018 and revamped its stores, but it struggled to sell after a surge in sales during lockdowns
The six Joann locations “are being closed as part of the routine evaluation and optimization of retail locations,” Joann’s director of corporate communications Amanda Hayes told Retail Dive.
She added that the company “has also opened new and remodeled locations in recent months, including new stores in Great Falls, Montana and Maplewood, Minnesota.”
Joann’s closures come after a widespread “retail apocalypse” last year, which saw major companies file for bankruptcy and brick-and-mortar stores close en masse.
Through mid-December, US retailers closed 7,300 stores – almost 60 percent more than in 2023.
The most recent major retail bankruptcy was Container Store, which filed for Chapter 11 protection on December 22. There is no news yet about the fate of the physical locations.
The store – known for its homewares including closet organizers and storage bins – has been in business for 46 years.
Despite getting a boost from Marie Kondo’s hit Netflix show “Tidying Up” during the Covid-19 pandemic, the chain has suffered mounting losses in recent years.
The most recent major retail bankruptcy was Container Store, which filed for Chapter 11 protection on December 22
Party City will immediately close all of its stores, ending nearly forty years of existence
Big Lots also said last year it was beginning to end sales at all its U.S. stores after filing for bankruptcy in September.
The company initially said it would close all of its 963 remaining locations after a sale to a private equity firm fell through, but has since found an investor to keep between 200 and 400 open.
Meanwhile, after nearly four decades as an American retail institution, Party City announced late last year that it would close all of its 850 stores in the coming weeks.
US department store Macy’s also announced it would close 65 locations across the country before the end of January.
There are fears that the carnage will continue into 2025.