JOANN Files for Bankruptcy Due to Drop in Consumer Spending

Due to a steep drop in discretionary spending by customers, JOANN, the 81-year-old fabric and craft retailer based in Ohio, has filed for bankruptcy, according to CNN.

On Monday, in a statement, JOANN announced its filing for Chapter 11 bankruptcy protection. The company revealed it secured $132 million in new funding, cutting down its debt that had shot up to $1 billion. Even with this financial restructuring, JOANN assured customers that its approximately 850 stores and online platform will carry on as normal.

In the last few years, revenue for JOANN has been dropping, apart from a short period during the pandemic when people were couped up at home and spent more money on creative goods. However, since things shifted back to normal life post-pandemic, that demand fell. At the same time, inflation rose, leading to customers being more mindful of what they spend money on, with nonessential items falling off the shopping list.

In JOANN’s statement, Scott Sekella, the company’s chief financial officer said, “This agreement is a significant step forward in addressing JOANN’s capital structure needs, and it will provide us with the financial resources and flexibility necessary to continue to deliver best-in-class product assortments and enhance the customer experience wherever they are shopping with us.”

Since its bankruptcy filing, JOANN’s stock has been taken off the Nasdaq exchange, with the company set to transition to private ownership. JOANN anticipates completing this process as early as next month.

In a note on Monday, Neil Saunders, managing director and retail analyst for GlobalData, said, “The bankruptcy of JOANN has been looming for a long time and was always a matter of when, rather than if. The bankruptcy process will now allow the arts and crafts chain to receive an infusion of cash at the same time as streamlining its operations and reducing debt levels.”

Saunders said that more of its customers are shopping at lower-priced rivals, such as Hobby Lobby. He said this is due to “weakening store standards and declining customer service levels, partly because of staffing cuts, have made stores less desirable.”