Crafts Retailer Joann Files Second Bankruptcy in A Year

In a surprising turn of events, crafts retailer Joann has filed for bankruptcy for the second time in less than a year. The company, which emerged from a previous bankruptcy in March 2024, has once again found itself struggling with debt and declining sales. This time, however, the situation appears to be more dire, with Joann seeking court approval to sell all of its assets.

The company, which operates approximately 850 stores in 49 states, has been grappling with a mountain of debt since a $1.6 billion leveraged buyout by private equity firm Leonard Green & Partners in 2010. Despite aggressive expansion and a brief pandemic-driven sales boom, Joann has been unable to sustain its debt load as sales have tapered off and operating costs have increased.

In March 2024, Joann entered into a pre-packaged Chapter 11 bankruptcy, emerging just six weeks later as a private company without closing any of its nearly 830 stores or intentionally reducing its workforce of 18,000. However, the company has since struggled with stability in key leadership positions, with both the chief financial officer and executive chairman leaving the company within a matter of months.

Joann's second bankruptcy filing comes as the company continues to grapple with a significant debt burden and declining sales. In the months following its emergence from bankruptcy, the company has been seeking rebates and retroactive discounts from vendors as sales have slumped. This has led to concerns about the company's financial health and its ability to continue operating as a going concern.

The company has also been closing some locations, with at least six closures confirmed so far, including stores in Massachusetts and New York. Local news outlets have reported on closures in other markets as well, raising concerns about the company's long-term viability.

Joann's stock was delisted from the Nasdaq following its previous bankruptcy and will become privately owned following the current bankruptcy process. The company expects to emerge from bankruptcy as a private company with a strengthened balance sheet and improved liquidity, allowing it to work collaboratively with vendors, business partners, and landlords, and ultimately to inspire the creativity in its customers.

However, the future of Joann remains uncertain, as the company continues to grapple with a significant debt burden and declining sales. With competition from rivals like Hobby Lobby and Michaels, as well as the ongoing impact of inflation and economic downturn, Joann faces an uphill battle to regain its footing in the crafts retail market.