Fabric and crafts retailer Joann declared bankruptcy on Monday amid spending cutbacks from consumers and higher operating costs. The retail chain said it plans to keep its 800-plus stores open while it works through the restructuring process.
Hudson, Ohio-based Joann, which filed for Chapter 11 bankruptcy, reported between $1 billion and $10 billion in debt. In court documents filed Monday, the retailer blamed higher costs from shipping overseas products, as well as waning consumer demand.
As part of its bankruptcy, Joann said it has received about $132 million in new financing and expects to reduce its balance sheet’s funded debt by about $505 million. The financing is “a significant step forward” to help Joann continue operating its stores, Scott Sekella, Joann’s chief financial officer said in a statement.
The filing marks the latest in a series of major retailers that have filed for bankruptcy in recent years, including GNC, J.C. Penney and Party City. Brick-and-mortar retailers have struggled as Americans have increasingly shifted their spending to online rivals such as Amazon.com.
In Joann’s case, the company was buoyed in the early days of the pandemic as the shutdown spurred some consumers to take up crafts and other projects. But during the past two years, Joann’s sales have tumbled, with the company blaming consumer cutbacks due to inflation and other economic challenges.
On the revenue side, sales slowed as COVID-19 policies were repealed or reduced, demand for fabric and mask-related products abated, hobbyists spent less time crafting indoors, and the federal government terminated pandemic-related stimulus programs,” Joann said in court documents.
At the same time, Joann was walloped by higher costs after China hiked tariffs on imports, an issue that occurred when the company was also spending a lot of money remodeling its stores. Rising ocean freight costs also inflated its inventory costs by more than $150 million between its 2021 to 2023 fiscal years, it added.
“While these conditions affected the retail sector broadly, Joann’s heavy reliance on imported goods meant these conditions caused, and continue to cause, outsized impacts on the company,” Joann said in court documents.
— With reporting from The Associated Press
