National Crafts Retailer JOANN Files for Bankruptcy

A person arrives at the U.S. District Bankruptcy Court for the Southern District of New York in Manhattan, on Jan. 9, 2020. Brendan McDermid/Reuters

Fabric and crafts retail company JOANN Stores Inc. filed for bankruptcy for a second time in a year after facing financial difficulties in a challenging retail environment.

The company filed a petition for Chapter 11 bankruptcy at the U.S. Bankruptcy Court for the District of Delaware on Jan. 15, seeking court approval to sell “substantially all of its assets” to Massachusetts-based Gordon Brothers Retail Partners, according to a Jan. 15 statement from JOANN. Founded in the 1940s, the Ohio-based brand has approximately 850 stores spread across 49 states and employs around 19,000 people.

Gordon is a “stalking horse” bidder, referring to entities that set an initial bid on bankrupt company assets, thus protecting them from receiving unreasonably low bids. “The proposed transaction is subject to higher and better offers, among other conditions,” JOANN said. “The company continues to actively solicit alternate bids.” If there are qualified bids, JOANN will go ahead with auctions.

The American fabric, craft, and sewing supplies sector is worth more than $5 billion, with Michaels Companies holding one of the top positions in the market, followed by Hobby Lobby and JOANN, based on industry reports. JOANN employs nearly 70,000 people, and is expected to grow.

JOANN had filed for Chapter 11 bankruptcy in early 2024, a decision made after the company saw “a general withdrawal from the consumer spending highs experienced during COVID,” Michael Prendergast, the interim chief executive officer at the company, said in a court filing.

Between 2021 and 2023, JOANN’s annual revenues dipped from $2.76 to $2.22 billion, a decline of almost 20 percent. The 2024 bankruptcy was filed to reorganize the company.

However, the company continued to face headwinds. “Unanticipated inventory challenges post-emergence, coupled with the prolonged impact of an excessively sluggish retail economy, put JOANN back into an untenable debt position,” the filing said.

The company eventually decided to file Chapter 11 again. JOANN said its stores will remain open and continue serving customers during the course of the bankruptcy proceedings. In addition, employees will continue to receive pay and benefits, it said.

Prendergast said that after becoming a private company in April 2024, the management had implemented several measures to “manage costs and drive value.”

“However, the last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.”

US Bankruptcies 2024

JOANN’s bankruptcy comes as U.S. corporate bankruptcies set a 14-year annual high last year, according to a report by S&P.

The company tracked 694 filings in 2024, with the previous high being 828 filings in 2010 during the aftermath of the Great Recession. Annual filings have risen for the past two years after dipping in 2022. S&P’s bankruptcy calculations only take into account large companies that meet certain asset and liability thresholds.

“Businesses continued to face pressure in 2024 from elevated interest rates, especially as total debt among credit-rated nonfinancial US companies reached a quarterly record of $8.453 trillion and interest coverage remained weak in the third quarter of the year,” the report said.

Companies operating in the consumer discretionary sector filed the highest number of bankruptcies last year at 109, followed by industrials at 90, health care 65, consumer staples 42, information technology 32, and financials 26. The remaining five sectors tracked by S&P had filings below 20.

“The consumer discretionary sector has been particularly susceptible to economic headwinds, even with strong overall US retail sales activity, as consumer buying trends have shifted and budgets have tightened due to inflation,” the report said.

Michael Wilkerson, the founder of Stormwall Advisors, called 2024 “one of the worst years on record” for retailers, in a Jan. 13 commentary for The Epoch Times.

Multiple brands filed for bankruptcy and shut down while others shuttered hundreds of stores. Some of the big companies that went bankrupt include The Container Store, Party City, 99 Cents Only, Bed Bath and Beyond, Conn’s, and Big Lots.

A key reason retailers faced challenges last year was financial stress in American households.

“While inflation moderated in 2024, consumer prices remained more than 20 percent higher than they had been three years ago. Basic goods like food, fuel, and household costs comprised an increasing share of American wallets, squeezing out discretionary spending,” wrote Wilkerson.