Fabric and crafts retailer Joann declared bankruptcy on Monday amid spending cutbacks from consumers and higher operating costs. The retail chain said it plans to keep its 800-plus stores open while it works through the restructuring process.
As part of its bankruptcy, Joann said it has received about $132 million in new financing and expects to reduce its balance sheet's funded debt by about $505 million. The financing is "a significant step forward" to help Joann continue operating its stores, Scott Sekella, Joann's chief financial officer said in a statement.
The filing marks the latest in a series of major retailers that have filed for bankruptcy in recent years, including GNC, J.C. Penney and Party City. Brick-and-mortar retailers have struggled as Americans have increasingly shifted their spending to online rivals such as Amazon.com.
In the case of Joann, the company experienced a surge in sales at the onset of the pandemic as more consumers turned to crafting and other projects. However, over the past two years, Joann has seen a decline in sales attributed to consumer cutbacks influenced by inflation and economic challenges.
"On the revenue side, sales slowed down as COVID-19 restrictions eased, leading to a decrease in demand for fabric and mask-related products. Additionally, hobbyists spent less time on indoor crafting, and the end of pandemic-related stimulus programs by the federal government further impacted sales," Joann stated in court documents.
Joann also faced challenges from increased costs, including higher tariffs on imports from China and rising ocean freight expenses. These factors, combined with significant investments in store renovations, resulted in a more than $150 million increase in inventory costs between the 2021 and 2023 fiscal years.
"Despite these challenges being felt across the retail sector, Joann's reliance on imported goods magnified the impact on the company," Joann explained in court documents.
