How Should JOANN Capitalize on Its Second Chance?

Earlier this year, JOANN, the 81-year-old fabric and craft retailer from Ohio, filed for bankruptcy due to a significant decline in customer spending, as reported by CNN. Despite securing $132 million in new funding to reduce its $1 billion debt, JOANN assured customers that its stores and online platform would continue as usual. The bankruptcy process, which involves transitioning to private ownership, aims to streamline operations and reduce debt levels.

According to Neil Saunders, managing director of GlobalData, “The bankruptcy of JOANN has been looming for a long time and was always a matter of when, rather than if.” He noted that the retailer’s customers were increasingly opting for lower-priced rivals like Hobby Lobby due to “weakening store standards and declining customer service levels, partly because of staffing cuts.”

Previously discussed on RetailWire was the notion of bankruptcy being the end of JOANN. This also revealed a growing discontent on social media about the frustrations of the retailer’s customers. These customers expressed dissatisfaction with the quality of JOANN’s products and store locations. Now, in a swift move, JOANN is on the verge of exiting bankruptcy proceedings. Expectations are high for JOANN to conclude its financial restructuring and step out of the court’s supervision “in the coming days.”

The arts and crafts retailer announced that its Prepackaged Joint Plan of Reorganization has been confirmed by the U.S. Bankruptcy Court. Expectations are set for the company to emerge from bankruptcy with significantly reduced debt, marking its lowest level in over 10 years.

At a court hearing in Wilmington, Delaware, on Thursday, U.S. Bankruptcy Judge Craig Goldblatt approved JOANN’s restructuring plan, which will eliminate $505 million in debt while keeping all 815 retail locations operational, according to Reuters. The judge described the outcome as “very good” for employees, landlords, and craft suppliers alike. Creditors, who have unanimously agreed to cancel half of the company’s debt and assume ownership of its post-bankruptcy equity, have facilitated a smooth process, commended by Goldblatt for the level of consensus and hard work.

Throughout the expedited process, JOANN’s over 800 stores have remained open, and JOANN.com continues to serve customers’ creative needs. The company has also managed to retain the jobs of its 18,000 employees.

Chris DiTullio, chief customer officer, stated in the company’s press release, “We are pleased to have reached this significant milestone less than 40 days after initiating our court-supervised process.” He also highlighted the dedication of team members and support from industry partners and customers and emphasized the company’s commitment to enhancing customer experience and product offerings.

Scott Sekella, JOANN’s chief financial officer, acknowledged the support of financial stakeholders, enabling smooth operations during restructuring. He highlighted the company’s improved financial position and expressed readiness to collaborate with vendors and partners moving forward.

“We are grateful to our financial and industry stakeholders, whose support enabled us to continue operating smoothly and move through this process on an expedited basis. Their investment not only provides us with additional financial resources, but also reflects their confidence in our Team Members and in our business to seize on the opportunities ahead. With a strengthened balance sheet and improved liquidity, we are better positioned to work collaboratively with our vendors, business partners and landlords, and ultimately to inspire the creativity in our customers that helps them find their happy place.”

Scott Sekella, chief financial officer and co-lead of the interim office of the CEO, via JOANN

Upon emergence from bankruptcy, which could occur by April 30, according to court filings, JOANN will transition into a privately owned entity, with ownership vested in select financial stakeholders and industry parties. This restructuring marks a significant step for JOANN, positioning the company on a stronger financial footing to pursue future opportunities and serve its customers effectively.

JOANN has been without a CEO since May 2023 when Wade Miquelon retired.