Fabric and crafts retailer Joann has filed for Chapter 11 bankruptcy protection after its debt reached more than $1.1 billion.
The company said in a statement that it is carrying out a restructuring plan and expects to emerge from bankruptcy within the next month. It may become a private business with its shares delisted from the stock exchange. Joann previously filed for a $100 million initial public offering in early 2021.
According to Retail Dive, the firm has signed a transaction support agreement with its financial stakeholders and other financing parties to reduce its debt by about $505 million. Stores will remain open in the meantime.
MD of GlobalData Neil Saunders said the bankruptcy of Joann has been looming for a long time with more than $1.1 billion of debt on the company’s balance sheet.
The bankruptcy process will help the retailer access more cash to streamline its operations and reduce debt levels, the analyst continued.
“In some ways, the restructuring is a more dramatic extension of the work Joann has already been undertaking to reshape the business, including eliminating positions and negotiating price concessions with suppliers.”
The decline on the top line remains a challenge amid the current economic conditions, which resulted in lower demand in the crafting market, Saunders added. The retailer also lost to rivals such as Hobby Lobby – which offers lower prices – and a myriad of crafting supply websites.
“While the restructuring process will address some of the financial challenges, Joann will also need to think about how to craft a better proposition to help it grow the top line. For a still constrained company, this will be a major challenge,” the analyst concluded.
Founded in 1943, Joann sells fabric and material for crafting and home decorating at approximately 850 stores in 49 states as well as on its e-commerce site.
