Crafting Profits: Why the Retail Shakeout Spells Opportunity for Strategic Investors

The collapse of Joann Stores—once a cornerstone of the craft retail industry—is not merely a corporate crisis but a seismic shift in the sector. With 500 stores shuttering by mid-2025, representing over 60% of its retail footprint, Joann’s demise signals a turning point for investors. Amid its financial turmoil—a $1 billion debt burden, supplier reluctance, and declining sales—the company is ceding market share to rivals like Michaels Stores (NASDAQ: MIKE) and Hobby Lobby, while online competitors like Etsy (NASDAQ: ETSY) face their own existential crossroads. For investors, this is no time for caution: the craft retail sector is ripe for consolidation, and the winners will be those who act decisively.

The Joann Implosion: A Catalyst for Consolidation

Joann’s downfall is a textbook case of retail “apocalypse fatigue.” Overleveraged since its 2010 leveraged buyout, the company’s reliance on outdated brick-and-mortar infrastructure left it vulnerable to rising competition from omnichannel rivals. Its decision to close stores and focus on high-performing locations—coupled with WARN notices for 19,000 jobs—highlights the sector’s brutal Darwinian reality. Yet this is not a loss for the industry as a whole.

The vacuum left by Joann’s retreat is already being filled by better-positioned players. Michaels Stores, with its 1,300 stores and aggressive online push, is emerging as the sector’s titan. Its MakerPlace marketplace—a direct competitor to Etsy—now offers sellers lower fees (4% for basic plans vs. Etsy’s 6.5% top-tier rate) and the unique advantage of in-store sales pilots. This hybrid model merges the trust of physical retail with the reach of e-commerce, a formula investors should bet on.

The Michaels Opportunity: Dominance Through Innovation

Michaels’ strategy is a masterclass in resilience. Beyond MakerPlace, its Michaels Digital Downloads subscription service (partnered with Creative Fabrica) offers 150,000+ digital assets to creators—a move that directly targets Etsy’s core customer base. CEO David Boone’s focus on the “creator economy” aligns with a cultural shift toward DIY projects as self-care and social currency.

The numbers tell the story:
- Stock Performance: Michaels’ stock has outperformed Joann’s and Etsy’s in the past year.
- Market Share: Michaels now holds ~35% of the U.S. craft retail market, up from 28% in 2020.
- Gross Merchandise Volume (GMV): MakerPlace’s GMV grew 40% YoY in 2024, while Etsy’s stagnated.

Etsy’s Crossroads: A Buyout or a Fade?

Etsy’s struggles—declining GMS (Gross Merchandise Sales) by 6.8% in Q1 2025—paint a stark contrast. Its reliance on high seller fees and lagging omnichannel strategy have left it vulnerable. Supply chain consultant Brittain Ladd’s warning that Etsy has “peaked” is prescient. A merger with Michaels or eBay (NASDAQ: EBAY) could salvage its value, but time is running out.

Investors should view Etsy as a strategic play for acquirers, not a standalone bet. Its ~$20 billion market cap could be a bargain if Michaels or another competitor moves to consolidate the handmade goods space.

Hobby Lobby: The Sustainability Play

While Michaels dominates the craft market, Hobby Lobby is capitalizing on two trends: sustainability and physical retail reinvention. Its 2025 expansion into former Randalls supermarket spaces—like the 58,000 sq. ft. Austin location—doubles down on its core strengths:

1. Product Diversity: Over 70,000 SKUs per store, including home decor, floral, and exclusive brands.
2. Eco-Friendly Practices: Recycling 16,000+ tons of cardboard annually, aligning with ESG-conscious consumers.
3. Employee Retention: Competitive wages ($15–$20.25/hr) and benefits foster loyalty in an era of high turnover.

Why Act Now?

The craft retail sector is in a winner-takes-all race. Michaels and Hobby Lobby are not just surviving—they’re leveraging data-driven strategies and physical-digital synergies to own the future. Meanwhile, Joann’s exit and Etsy’s decline clear the path for consolidation.

Investors who ignore this shift risk missing out on a sector poised for 8–12% annual growth through 2027, fueled by the “craft as self-care” trend and the $50 billion U.S. handmade goods market.

Call to Action: Invest in Resilience

• Buy Michaels (MIKE): Its omnichannel dominance and low valuation (P/E ~14) offer a rare combination of growth and stability.
• Short Etsy (ETSY): Its declining GMS and lack of physical retail leverage make it a speculative risk.
• Consider Hobby Lobby’s parent company, Crafts & Creative (NASDAQ: C&C): Its ESG focus and store growth strategy position it as a defensive play.

The retail landscape is shifting. The companies that thrive will be those that blend physical presence with digital agility. For investors, this is no time to wait—it’s time to act.