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Popular Fabrics Store Files for Bankruptcy After Over Eight Decades of Service

Popular Fabrics Store Files for Bankruptcy After Over Eight Decades of Service
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Popular Fabrics Store Files for Bankruptcy After Over Eight Decades of Service

Source: Pinterest

Joann Fabrics and Craft, the renowned 81-year-old fabric and craft retailer, has filed for bankruptcy.

The Ohio-based company faces financial strain with customers cutting back on discretionary spending.
In a statement released on Monday, Joann announced its filing for Chapter 11 bankruptcy protection. However, despite this restructuring move, there is hope, as the company revealed it has secured $132 million in fresh funding.

Despite the Bankruptcy, the Company Will Continue Operating

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This capital injection will reduce its financial burden, slashing its debt in half from a shocking $1 billion. Joann reassured its loyal customers that its operations would continue without interruption despite the bankruptcy filing.

The company remains committed to serving its customers with about 850 stores nationwide and a thriving online presence. This commitment shows Joann’s dedication to maintaining a seamless customer shopping experience despite its challenges.

Joann’s Financial Struggle

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Joann has been struggling financially, with revenues decreasing over the years. There was a bit of a boost during the Covid-19 lockdown when people spent more on crafts while stuck at home.

But now, as life returns to normal, that boost has faded away. On top of that, prices for everything are increasing due to inflation, making people spend less on things they don’t really need, like crafts.

The Company’s Statement

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According to Joann, customers can still access the same services and products as usual.

“This agreement is a significant step forward in addressing Joann’s capital structure needs, and it will provide us with the financial resources and flexibility necessary to continue to deliver best-in-class product assortments and enhance the customer experience wherever they are shopping with us,” said Scott Sekella, the company’s chief financial officer, in the company statement.

Joann Will Now be Privately Owned

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Following its bankruptcy filing, Joann’s stock has been delisted from the Nasdaq stock exchange. As a result, the company is set to transition from publicly traded to privately owned.

“The bankruptcy of Joann has been looming for a long time and was always a matter of when, rather than if,” said Neil Saunders, managing director and retail analyst for GlobalData.

On Its Vendors and Landlords

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The company’s statement addressed its legal filing and what customers could anticipate, as well as its customers’ relationships with vendors and landlords.

“Customers, vendors, landlords, and other trade creditors will not see any disruption in services,” it said in a statement. “The Company remains as focused as ever on providing customers with quality products and services that inspire their creativity.”

Joann Has a debt of $1 billion

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Joann’s decision to file for Chapter 11 bankruptcy follows its disclosure of being over $1 billion in debt. This substantial debt comes from declining revenues and an expanding net loss.

The fabric store reports that this debt has continued to rise due to an “uncertain consumer environment.” Its filing indicated liabilities ranging from $1 billion to $10 billion and assets ranging from $500 million to $1 billion.

The Company’s Competitors

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In its latest quarterly earnings report released in December, Joann disclosed a decline in sales. Its executives cited a challenging retail environment as the primary factor.

However, the company’s competitors, Michael’s and Hobby Lobby, both privately held, have not publicly shared their performance. They have yet to make their status clear despite facing similar economic challenges.

Joann’s Outstanding Debts

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In 2011, the private equity firm Leonard Green & Partners acquired Joann for approximately $1.6 billion and subsequently took it public in 2021. Initially, Joann’s stock price saw an upward trajectory, but it later experienced a decline.
Now, it is trading at approximately 20 cents per share. Among Joann’s outstanding debts, it owes approximately $12 million to Spinrite, its largest unsecured creditor.

The Company Doesn’t Have a CEO

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Joann has been without a full-time CEO for over a year now. In May of last year, Wade Miquelon, the company’s CEO, stepped down and retired following what he described as a “challenging” year.
Since Miquelon’s departure, Joann has been under the leadership of interim CEOs. Presently, Chris DiTullio serves as the Chief Customer Officer and co-leads the interim office of the CEO.

The Chief Customer Officer’s Statement

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DiTullio also issued a statement expressing gratitude for the support that the company has received. “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,” he said.
DiTullio also spoke about Joann’s long-standing success over the past 80 years on how it has served crafters and people who seek to unleash their creativity through crafting and creation.

His Statement Continued

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“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,” DiTullio said.
Unfortunately, the company is indebted to other yarn and fabric suppliers, FedEx, and the commercial real estate firm Jones Lang LaSalle.

Joann’s Bankruptcy Was Anticipated

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Many analysts were not shocked by Joann’s bankruptcy announcement. With insights into the company’s financial struggles and market challenges, analysts foresaw this eventuality.
Joann has a strong legacy and position in the crafting industry. However, industry observers say ongoing shifts in consumer behavior and economic pressures have made the bankruptcy filing a foreseeable outcome.