The well-known crafts retailer JOANN is stitching together a plan for survival after declaring Chapter 11 bankruptcy on Monday. The chain, which runs more than 800 stores across the country, is hoping to cut down on its massive debt load while keeping doors open and crafting aisles stocked. In a move to reassure customers and staff, the company announced, through a press release, that they expect to fully honor obligations to employees, trade creditors, and landlords.
Facing a squeeze from both increasing interest rates and declining sales, JOANN's decision to file for bankruptcy follows a period of cost-cutting attempts that failed to sufficiently stabilize its financials. In the wake of a temporary sales boost during the COVID-19 lockdowns, the retailer found itself overburdened with upwards of $1.06 billion in debt, according to documents filed in court. However, the company is set to receive about $132 million in new funding to keep the company afloat, a move that aims to reduce its debt by around $500 million.
In a statement cited by CBS News, Scott Sekella, JOANN's Chief Financial Officer, called the new financing "a significant step forward" in their restructuring efforts. The Ohio-based retailer, along with its financial backers, remains optimistic about a quick Chapter 11 process completion, potentially by the end of April 2024. The post-bankruptcy landscape for JOANN indicates a transition to private ownership, thereby delisting its shares from Nasdaq and any other public stock exchange.
Joining the ranks of other major retailers like GNC, J.C. Penney, and Party City, JOANN's contraction is symptomatic of broader sectoral challenges. Brick-and-mortar stores have to increasingly compete with online marketplaces, with giants such as Amazon redefining the retail space. To further unravel its financial woes, JOANN was hit by climbing costs due to China's raised tariffs on imports and rising ocean freight charges, which reportedly added over $150 million to its inventory costs between 2021 and 2023. Chief Customer Officer Chris DiTullio, also co-lead of the Interim Office of the CEO, affirmed their progress through a cost reduction initiative, telling KTLA, "We are excited by our progress on both top and bottom-line initiatives in the past year and are confident the steps we are taking will allow JOANN to drive long-term growth."
