Craft Store Chain Joann Files Bankruptcy

Fabric and crafts retailer, Joann Inc., has filed for Chapter 11 bankruptcy in an attempt to decrease their current debt.

The Hudson, Ohio-based company said it expects to emerge from bankruptcy at the end of April 2024, and will likely become privately-owned.

Joann Inc. first landed on the map when the Reich and Rorhbach families joined forces to sell fabric at an import store in the Cleveland, Ohio, suburbs back in 1943. The store quickly expanded with a second location in 1947 and incorporated under the name Cleveland Fabric Shops, Inc.

After continued growth, the company was renamed Jo-Ann Fabrics, and spread beyond Cleveland in the 1960s.

Since then, Joann has become a mainstay in the crafting community, offering sewing, decorating, fiber arts, and crafting supplies online and in its 850 U.S. stores.

As consumers choose to spend money on outdoor activities and eating out post-pandemic, there were fewer takers for at-home crafts, a decision that hit the hobby supplies retailer hard.

For background, Joann has struggled to manage both cashflow and inventory levels since going public in 2021, and its shares have lost 85% of their value.

Joann also has a loan valued at less than 10 cents on the dollar due in 2028. In an attempt to raise more liquid cash, the struggling company earned around $34 million on a sale and leaseback deal for a facility in Hudson, Ohio, but still grappled with term loan payments and high interest after the influx of cash.

There are a few different bankruptcy filing options available to a struggling business, but Chapter 11 is usually the most palatable — the personal assets of stakeholders are not put at risk, the company is not required to close its doors, and the business can continue as usual with the caveats that lenders have decision-making capabilities and any new loans must be court approved.

Joann, which has over 800 stores across the country and a website, will continue to function as usual during the bankruptcy process, thanks to a deal the company struck with most of its shareholders.

In Chapter 11, a reorganization plan is proposed and will be accepted by the court if it meets the necessary legal requirements and achieves the required amount of votes. If a creditor’s rights are affected by the proposed plan, they may have the opportunity to participate in the vote.

Despite signs of an improving economy, consumers are tightening their budgets on non-essential goods like crafts and fabrics and focusing on budgeting for essentials like groceries and household goods amid dramatically increased costs of living, causing stores like Joann Inc. to lose revenue.

According to the U.S. Bureau of Labor Statistics, costs for consumer goods like groceries continue to climb despite decreasing inflation throughout 2023 and 2024.

With curbed consumer spending, other retailers selling non-essential goods may face similar financial dilemmas. The Children’s Place Inc., Express Inc., and Big Lots Inc. are reportedly considering bankruptcy and reorganization alternatives to stay afloat.