JOANN Explores Bankruptcy Option To Control Debt

JOANN Inc. could file for Chapter 11 bankruptcy as a way to generate enough capital to keep its stores open.

Bloomberg reported that the filing could come as soon as this week, according to people familiar with the matter. Their sources said JOANN is ready to hand control of the company to lenders, allowing it to shed its debt. Bloomberg claims that discussions between the company and lenders remain ongoing, but filing for Chapter 11 bankruptcy would allow JOANN to continue operating as it looks to repay its creditors.

Bloomberg’s sources also cite that JOANN has had trouble maintaining liquidity and inventory levels. The chain sells fabric, sewing supplies, craft items, and home décor.

It’s a stark reality for the company, which fared very well during the pandemic, as people picked up hobbies to keep them busy while quarantining indoors. Unfortunately, as the pandemic waned, profits dropped.

Crafts retailer Joann is considering a bankruptcy filing as soon as next week as part of a deal that would hand control of the company to lenders https://t.co/rCtij3Iw6V

— Bloomberg (@business) March 3, 2024

The news of the possible bankruptcy comes days after JOANN’s Wooster store held a massive 90% off sale in Ohio. The outlet closed on Feb. 21, one month after JOANN’s Zanesville branch in the same state closed, according to local Fox affiliate WJW.

Other JOANN stores are also closing in Batavia, New York; Keene, New Hampshire; Bridgeport, West Virginia; and Marion, Ohio. The company tried to reassure customers that not all JOANN stores were closing. A statement said that planned store closures were part of a “normal business evaluation process,” per The US Sun.

“No two public companies are cut from the exact same cloth, yet the telltale signs of potential bankruptcy shown by craft retailer JOANN Inc. are universal: lots of leverage, recurring net losses, and negative free cash flow,” wrote CreditRiskMonitor last December.

JOANN has been a favorite arts and crafts retailer for 80 years, operating almost 850 stores in 49 states. However, like many retail store chains, it has struggled to overcome shifting sales toward online retailers like Amazon and Walmart.