Joann Inc. Files for Second Bankruptcy in a Year, Initiates Sale Process
Joann Inc., the 82-year-old arts and crafts retailer, has filed for Chapter 11 bankruptcy protection for the second time in less than a year. This latest filing comes just nine months after the company emerged from its previous bankruptcy proceeding in April 2024. The Ohio-based company, a dominant force in the sewing and fabrics market with over 800 stores nationwide and a robust e-commerce presence, cited persistent weak sales and unexpected inventory challenges as the primary drivers for this second bankruptcy filing. The company is actively seeking a buyer for its assets and has engaged Gordon Brothers Retail Partners, known for its recent handling of the Big Lots sale, as the stalking horse bidder. This means Gordon Brothers has submitted an initial bid that sets a minimum price for other potential buyers, encouraging a competitive auction process.
Joann’s initial bankruptcy filing in March 2024 was portrayed as a strategic restructuring, allowing the company to transition to private ownership while maintaining its extensive store network. However, the resurgence anticipated post-restructuring failed to materialize. The current financial difficulties, coupled with what the company describes as “acute and unexpected” inventory problems, have forced Joann to pursue another Chapter 11 filing. This time, however, the focus is squarely on finding a buyer to ensure the continuation or, perhaps, the wind-down of the business. The company’s statement emphasizes its continued efforts to solicit alternate bids and its intention to conduct an auction if other qualified buyers emerge.
The timing of this bankruptcy filing, coinciding with the post-holiday season and January sales period, is not unusual for struggling retailers. This period often reveals the true extent of a retailer’s financial health after the crucial holiday shopping period. Joann’s interim CEO, Michael Prendergast, acknowledged the ongoing challenges in the retail environment and emphasized the company’s efforts to manage costs and drive value since its transition to private ownership. He stated that the current financial position and inventory constraints left them with no other option but to initiate the sale process. While expressing hope for the company’s survival as a going concern, the statement also acknowledges the possibility of liquidation if a suitable buyer is not found.
The company’s struggles are particularly striking given its strong market position. Joann is considered the national leader in sewing and fabrics, boasting one of the largest arts and crafts offerings in the United States. As recently as last fall, the company was actively promoting new value brands, expanded yarn assortments, and storewide price reductions. These initiatives, aimed at attracting customers and boosting sales, appear to have fallen short of their intended impact. The failure to capitalize on the first bankruptcy filing to close underperforming locations is now seen by some industry analysts as a missed opportunity. This oversight may have contributed to the current predicament, leaving the company vulnerable to further financial strain.
The potential outcome of the sale process remains uncertain. If no higher bidder emerges, Gordon Brothers is likely to take control of the company. While the stalking horse bid provides a baseline value, it also sets the stage for the possibility of a complete liquidation. This would result in the closure of stores, job losses, and a significant reshaping of the arts and crafts retail landscape. The current uncertainty surrounding Joann’s future underscores the volatile nature of the retail industry and the challenges faced by even established players in adapting to changing consumer behavior and economic pressures.
For now, Joann’s stores and website remain open, and employees continue to receive their pay. The company’s management and legal team are navigating the complexities of the bankruptcy process, hoping to secure a buyer who will either continue operations or offer a smooth transition for its employees and loyal customer base. The unfolding situation serves as a stark reminder of the challenges facing brick-and-mortar retailers in today’s dynamic and competitive market. This is especially poignant considering the brief surge in sales Joann experienced during the early stages of the pandemic when stay-at-home orders fueled a renewed interest in arts and crafts. The company’s inability to sustain this momentum highlights the difficulty of translating short-term gains into long-term stability in a rapidly evolving retail environment.
