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    Sunday, April 14, 2024

    Joann files for bankruptcy as consumers pull back on nonessentials

    Joann, long a destination for sewing and crafts enthusiasts, filed for bankruptcy Monday as consumers continue to scale back on nonessentials and online competition intensifies.

    The company, which has been in operation since 1943, said it has no plans to shutter any of its more than 800 stores in 49 states. In a news release, the Hudson, Ohio-based chain said it had reached a deal to secure “approximately $132 million in new financing and related financial accommodations and expects to reduce funded debt on its balance sheet by approximately $505 million.”

    Joann will become a private company after it completes the bankruptcy process, which could occur as early as next month. It also expects to retain its workforce of 18,205, and said the filing would have no effect on company gift cards or its reward program.

    Scott Sekella, Joann’s chief financial officer, said the agreement would provide the company with the “financial resources and flexibility necessary to continue to deliver best-in-class product assortments and enhance the customer experience.” He also noted that 95 percent of its stores were “cash flow positive.”

    Joann is the latest specialty retailer to seek Chapter 11 protection as online options like Amazon lure away shoppers. Bed Bath & Beyond, Christmas Tree Shops and David’s Bridal all filed for bankruptcy last year. (Amazon founder Jeff Bezos owns The Washington Post.)

    Joann and its peers saw a resurgence during the pandemic, as homebound consumers looked for ways to entertain themselves or beautify their spaces. But a spike in inflation — particularly at the supermarket — forced many Americans to scale back on discretionary spending. Though prices overall have cooled, they remain elevated for groceries, which have climbed 25 percent since the onset of the pandemic in March 2020.

    Unlike some of the other struggling retailers, Joann has a promising plan to exit bankruptcy quickly, which “would be a remarkable result in today’s retail climate,” said Sarah Foss, legal and bankruptcy expert at analytics company Debtwire. “Other brick-and-mortar retail chains like Bed Bath & Beyond, Christmas Tree Shops and Soft Surroundings [lingered] in bankruptcy before ultimately having to liquidate.”

    Bed Bath & Beyond, one of the first big retailers in the specialty-store space, announced in April 2023 that it would close all 360 of its namesake stores. But the brand still lives online after Overstock — once an online repository for closeout furniture and home decor — acquired its intellectual property for $21.5 million in June. David’s Bridal, which had about 278 stores in the U.S., was sold to Cion Investment Corp., which has kept nearly 200 stores running and invested $20 million to fund the chain’s growth.

    But Joann still has its challenges, said Neil Saunders, managing director of GlobalData, a business research and analytics firm. While it’s still “a force to be reckoned with in the fabrics and textiles space, it has lost customers to rivals over recent years.”

    The retailer’s store standards, including customer service, have waned, he said, making the brick-and-mortar experience less appealing. “And a desire for lower prices has driven some shoppers to alternatives like Hobby Lobby.”

    In its filing in U.S. Bankruptcy Court in Delaware, the company listed its total assets at $2.26 billion and total debts at $2.44 billion.

    Joann’s stock fell 20.6 percent Monday, closing at 18 cents. It has lost 91 percent of its value in the past year.

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