Joann Fabrics, an 81-year-old retailer that is a go-to for craft makers, announced Monday that it has initiated a voluntary pre-packaged Chapter 11 filing in U.S. Bankruptcy Court.
Late last year, Zacks reported that the “specialty retailer of sewing and fabrics, and arts and crafts category products reported a wider-than-expected loss,” and that the company expected sales to decline this year. With Chapter 11 or “reorganization” bankruptcy, businesses create plans for reorganization and may continue to operate business.
“With the significant support of the Company’s financial stakeholders, Joann expects to complete this process on an expedited basis, as early as late April 2024,” said the company in a press release. “Following this process, the Company expects that Joann will become a private company owned by certain of its lenders and industry parties, and its shares will no longer be listed on Nasdaq or any other national stock exchange.”
As of Tuesday, Joann’s stock was down, according to the Nasdaq.
CNN reported this week that “Joann’s revenue has been on the decline in recent years, except for a brief pandemic boom,” while people were in lockdown. With that boom came controversy, as people questioned whether the craft store should have really been considered essential, per an article from Vice.
Joann said the Chapter 11 move, which includes a Transaction Support Agreement, should strengthen the company’s financial position. Along with the agreement, it received commitments for approximately $132 million in new financing and related financial accommodations. Joann expects to reduce funded debt on its balance sheet by approximately $505 million.
“Over the past several months, Joann has made meaningful business improvements through the execution of our Focus, Simplify and Grow cost reduction initiative,” said Chris DiTullio, Chief Customer Officer and co-lead of the Interim Office of the CEO for Joann. “We are excited by our progress on both top and bottom-line initiatives in the past year and are confident the steps we are taking will allow Joann to drive long-term growth.”
Scott Sekella, Joann’s Chief Financial Officer and co-lead of the Interim Office of the CEO, called the filing a step forward for the company. He added that the company has more than 800 stores across the U.S., and that 95% are “cash flow positive.”
Joann will continue to operate normally through the Chapter 11 process. Still, fans of the store were concerned when the news broke this week.
“So. Joann is going bankrupt. This means there are likely to be store closures and BIG sales,” said one X user who offered advice about what to get.
For now, it seems like crafters don’t have to worry. Joann said its “stores and the Joann.com website will remain open and continue operating as normal and customers vendors, landlords, and other trade creditors will not see any disruption in services,” and that it is filing a number of customary “first day” motions to enable it to continue uninterrupted operations – including employee wages and benefits – during the financial restructuring.
“We appreciate the support from our financial and industry stakeholders in this agreement, and their confidence in our ability to continue driving positive business change,” said DiTullio. “There is no other retailer with the same ability to serve sewists, quilters, crocheters, crafters and other creative enthusiasts as we have for the past 80 years, and we take great pride in seeing the passion and engagement of our millions of customers and our Team Members.”