A beloved craft and fabric retailer with a history spanning over 80 years filed for bankruptcy Wednesday morning for the second time in two years.
Experts are warning that a well-known business is on the brink of shutting down completely due to a major mistake made during its restructuring process following a bankruptcy filing last year.
The company, Joann, which has a presence in almost every state across the US, decided against closing any of its stores and opted to continue operating unprofitable locations instead of terminating costly lease agreements.
This decision has been labeled a significant error, putting Joann at risk of being acquired by a firm known for asset-stripping, similar to what happened with Toys R Us and Gymboree, which ultimately led to the closure of all their stores.
‘Joann kept all locations open after their last bankruptcy, which is the opposite of what a retailer is supposed to do.
‘You must reject leases from unprofitable locations and downsize. They didn’t, and now they are 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 like Gymboree, Toys R Us and BCBG.
‘Unless Joann is able to find a higher bidder during a bankruptcy auction, Gordon will take control of the company and most likely launch going out of business sales, and remaining employees will be laid off.’
Joann, which operates in nearly every US state, has recently shuttered six of its 815 stores
It emerged last week that Joann had recently shuttered six of its 815 stores – but it now faces all being shut.
Until 2018, it was known as Jo-Ann Stores but rebranded as ‘Joann’ to move beyond fabrics to embrace a wider range of crafts.
The six stores closed recently are in Burlington, Iowa; Owings Mills, Maryland; Holyoke, Massachusetts; Ithaca, New York; Hickory, North Carolina; and Williamsport, Pennsylvania.
Shoppers impacted by the closures can score steep discounts during liquidation sales, with markdowns ranging from 50 to 90 percent off in affected locations.
Joann first filed for Chapter 11 bankruptcy in March last year after pandemic-era sales growth faded, leaving the retailer with $1.2 billion in debt.
It emerged from bankruptcy the next month – with 815 stores across 49 states – after creditors agreed to cancel $505 million in debt in exchange for ownership of the company.
Sarah Foss, head of legal at Debwire, said this morning: ‘ Brick-and-mortar retail chains like Joann has been grappling with fierce competition from online retailers like Amazon.
‘Joann joins the likes of Bed Bath & Beyond, Christmas Tree Shops, and Soft Surroundings, which have all commenced Chapter 11 cases in the past year.
‘Retailers often seek out Chapter 11 bankruptcy protection to restructure their operations – it provides them with some bargaining power with landlords as they reduce their retail footprint and right-size their balance sheet.’
Joann is the latest retailer to face challenges after experiencing a pandemic-era sales boom. With Americans now returning to work, the surge in home crafting has significantly declined.
Home organization specialist The Container Store suffered the same fate, and filed for bankruptcy last month.
Despite the closures, Joann maintains that it has no plans for widespread shutdowns or going out of business.
Joann rebranded from Jo-Ann’s in 2018 and refreshed stores – but it has struggled for sales after a boom in sales during lockdowns
The six Joann locations ‘are being closed as part of routine store location evaluation and optimization,’ Joann’s director of corporate communications Amanda Hayes told Retail Dive.
She added that the company ‘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 saw major companies file for bankruptcy and brick-and-mortar stores close in their droves.
Up until mid-December, US retailers shut 7,300 stores – up nearly 60 percent from 2023.
The most recent big retail bankruptcy was Container Store, which filed for Chapter 11 protection on December 22. There has been no news yet on the fate of its brick-and-mortar locations.
The store – known for its home organizational goods, including closet organizers and storage bins – has been around for 46 years.
Despite receiving a boost from Marie Kondo’s hit Netflix show ‘Tidying Up’ during the Covid-19 pandemic, the chain has been weighed down by mounting losses in recent years.
The most recent big retail bankruptcy was Container Store, which filed for Chapter 11 protection on December 22
Party City is shutting down all its stores immediately, putting an end to nearly four decades of business
Big Lots also said last year it was beginning ‘going out of business’ sales at all its stores across the US, after filing for bankruptcy in September.
The company initially said it was closing all its 963 remaining locations, after a sale to a private equity firm fell through – but has since found an investor that should keep between 200 and 400 open.
Meanwhile after nearly four decades as a US retail institution, Party City announced late last year it would close all of its 850 stores in coming weeks.
America’s top department store Macy’s also announced it would shutter 65 locations across the country before the end of January.
There are fears the carnage will continue into 2025.
