Joann, a prominent fabric and craft chain, announced its decision to file for bankruptcy on Monday. This move comes as consumers increasingly pull back on spending due to the harsh economic landscape.
According to the company’s announcement, Joann has secured $132 million in new financing through an agreement with the majority of its financial stakeholders and other financing parties.
This deal also aims to reduce the company’s debt by approximately $505 million. Chris DiTullio, Joann’s Chief Customer Officer, stated, “We appreciate the support from our financial and industry stakeholders in this agreement, and their confidence in our ability to continue driving positive business change.”
The bankruptcy filing underscores the broader trend of slumping retail sales across the United States. In February, retail sales grew by a mere 0.6% month-to-month, excluding inflation, following a 1.1% decline in January. This highlights the growing reluctance among consumers to spend on non-essential items as prices continue to rise.
Joann Fabrics and Crafts has filed for Chapter 11 bankruptcy as it seeks to reorganize its finances. https://t.co/C07z1azI6W
— NBC News (@NBCNews) March 18, 2024
Despite the challenging circumstances, Joann remains committed to its unique position in the market.
DiTullio emphasized, “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.”
Notably, Joann currently operates over 800 stores across the United States, with 95% of them reportedly being cash flow positive.
The company intends to continue operating its stores and e-commerce website throughout the bankruptcy process. However, upon completion of the deal, Joann is expected to transition into a private company owned by certain lenders and will no longer be listed on the stock exchange.
Fabric and crafts retailer Joann has filed for Chapter 11 bankruptcy protection, as consumers continue to cut back on discretionary spending. Joann’s more than 800 stores and its website will continue to operate normally during the process. https://t.co/NKHqbS0qRI
— 2 News Nevada (@KTVN) March 18, 2024
The company’s financial struggles are evident in its recent earnings report, which revealed a 4.1% year-over-year decline in net sales for the third quarter, amounting to $539.8 million. This translated into a net loss of $21.6 million for the quarter. As of October 28, 2023, Joann’s long-term debt stood at around $1.15 billion.
The persistent inflationary pressures, with the consumer price index rising 3.2% year-over-year in February and 3.1% in January, have forced the Federal Reserve to maintain its federal funds rate between 5.25% and 5.50%, the highest in 23 years.
This has led to increased interest rates across the economy, further compounding the challenges faced by retailers like Joann.
