Joann Bankruptcy: Will the Crafts & Fabrics Retailer Finally Close Stores?

Fabrics and crafts retailer Joann filed for bankruptcy today marking the second time it has done so in just one year. The last Joann bankruptcy removed its shares from public exchanges, leaving the company operating privately.

Gordon Brothers Retail Partners is the stalking horse bidder lined up to acquire Joann’s assets as part of the bankruptcy process. This is the same company that purchased Big Lots following its bankruptcy filing late last year.

Joann interim CEO Michael Prendergast said the bankruptcy followed “significant and lasting challenges in the retail environment” over the last several years. This, combined with the company’s “financial position and constrained inventory levels” forced it to file for bankruptcy.

Where Did Joann Go Wrong?

Joann was among brick-and-mortar retailers that were struggling before the chaos of the COVID-19 pandemic. While a post-lockdown shopping boom delayed its demise, the company lost customers as increased inflation weighed on luxury spending.

Another misstep was made by Joann during its last bankruptcy filing, leading to its current $615 million of debt. The company chose to keep all its stores open, rather than close locations to conserve cash. This kept it operating at unsustainable levels and will likely lead to its liquidation in the current bankruptcy filing.

Are Retail Stocks Dying?

No, but specialty retailers are struggling as customers skip them in favor of department stores and online shopping. Catering to a niche audience isn’t as powerful of a proposition as it once was now that consumers can find just about anything they need on Amazon (AMZN), Etsy (ETSY), or Shopify (SHOP). This grants them a larger selection than physical retailers can offer and does so from the comfort of their homes. As such, traders might bet on this sector instead and will make informed decisions thanks to the comparisons below!

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