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Weighed down by debt and suffering a post-lockdown sales slump, fabric and craft retailer Joann filed for bankruptcy, according to a statement Monday.
As part of the process, Joann will be taken private by “certain of its lenders and industry parties,” but it didn't say that any of its roughly 800 stores would close.
“The bankruptcy of Joann has been looming for a long time and was always a matter of when, rather than if,” GlobalData retail analyst Neil Saunders wrote on Monday, as reported by CNN.
Bankruptcy will provide the chain with cash while allowing it to streamline operations and reduce debt, Saunders added, chalking up part of Joann's woes to lower-priced competitors and lower levels of customer service at Joann due to staff reductions.
The restructuring deal will provide about $132M in new financing and expects to cut its debt load by about $505M, or about half of the $1B it is currently carrying. The company said that 95% of its locations are “cash-flow positive,” and that it will emerge from bankruptcy as soon as late April.
Much of its debt load was acquired at floating rates, driving up interest costs for the Ohio-based company in recent years, Bloomberg reports.
Net sales at Joann dropped by 4.1% year-over-year during its third fiscal quarter, which ended in late October and is the most recent period the company has reported. Comparable sales in Q3 also dropped 4.1% compared with a year earlier.
The slump is part of a wider malaise for hobby stores that began after an early-pandemic bump. The Census Bureau doesn't track sales at craft stores, but the wider category of sporting goods, hobby, musical instrument and book stores saw stagnant sales growth month-over-month in February and was down 3% compared with February 2023.
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