Fabric and crafts retailer Joan has filed for Chapter 11 bankruptcy protection as consumers continue to cut back on discretionary spending.
The Hudson, Ohio-based company said in a release Monday that it expects to emerge from bankruptcy as early as the end of next month.
Following this process, Joan will likely be privately owned by certain financiers and industry players, and the company’s shares will no longer be publicly traded on stock exchanges, the company added.
Shares fell 16% to 19 cents.
Joann’s more than 800 stores and website will remain open as usual during the bankruptcy process. The company noted that it had reached agreements with most shareholders for financial support, and said vendors, landlords and other trade creditors should also not experience payment disruptions.
In addition to Monday’s filing in U.S. Bankruptcy Court, Joan said it has received about $132 million in new financing, which is expected to reduce its balance sheet financing obligations by about $505 million. .
Scott Sekera, JoAnn’s chief financial officer and co-head of the CEO’s interim office, said the transaction support agreement is a “significant step forward” in addressing the company’s capital structure needs. He said it had become. He added that the retailer will continue to operate as usual to “best serve our millions of customers across the country.”
Joanne’s bankruptcy filing reflects an overall slowdown in discretionary spending and a slowdown in consumer spending, at least compared to the boom seen early in the COVID-19 pandemic, as consumers take a step back from at-home crafts. It was submitted while I was there.
“Crafts, which did really well during the pandemic, is back down slightly as people find other things to do,” Neil Saunders, managing director of research firm GlobalData, told The Associated Press on Monday. he said. Currently, many people are sacrificing craft activities to spend money on experiences outside the home, such as eating out or attending sporting events.
This is putting pressure on all retailers involved in the handicraft market. But Joan’s unique challenges include the company’s high debt and increased competition, Saunders added.
For example, “casual crafters” can now get a wide variety of art supplies and kits at stores like Target, he said, while rival stores like Hobby Lobby offer lower prices. Ta. Joan also added that “professional services” have also been slid slightly from previous staffing levels.
“There’s still a place for Joao, but it will take a lot of effort to get him back into a stable position,” Saunders said. “I think this bankruptcy was always inevitable. In fact, despite the disruption it causes, this is a very good first step in getting the company back on track.”
Joan listed more than $2.44 billion in total debt and about $2.26 billion in total assets in a Chapter 11 petition filed in Delaware on Monday, citing figures from October 2023. .
Joanne went private in 2011, when it was acquired by Leonard Green & Partners for approximately $1.6 billion. Ten years later, Joan, still majority owned by a corporation, returned to the public market with an initial public offering at $12 per share.
The company began in 1943 with a single store in Cleveland, Ohio, and later grew into a national chain. The company, formerly known as Jo-Ann Fabric and Craft Stores, has rebranded with the shortened name “Joann” to celebrate its 75th anniversary.
