Failed crafts and fabrics store Joann has angered what few customers it has left by refusing to accept gift cards. This comes as the company prepares to close all its locations due to a bankruptcy filing. It’s also holding going-out-of-business sales, which customers were hoping to take advantage of with funds on gift cards.
Complaints have been lobbed at Joann, claiming the retailer didn’t give customers enough warning before cutting off gift cards. Others are upset that the company has taken funds without providing a product or service in return. Some argue this goes against laws, such as those in Maine where gift cards legally can’t expire.
Why Did Joann File for Bankruptcy?
Joann has struggled these last few years, making this the second time it has filed for bankruptcy in as many years. While specialty stores have always had a tough time appealing to the masses, craft stores have suffered in an era where online shopping eats into their sales. That was exacerbated when the COVID-19 lockdowns closed many retail locations, pushing customers to online shopping instead.
Many brick-and-mortar retailers never recovered from the pandemic, leaving many to file for bankruptcy. It also hasn’t helped that rising inflation puts pressure on luxury spending, preventing consumers from putting as much money toward their hobbies, such as crafting.
What This Means for Investors
Joann wasn’t a publicly traded company when it filed for bankruptcy, meaning there were no retail investors in the business. That’s due to the company choosing to go private after its previous bankruptcy last year.
However, this does serve as a warning against investing in specialty stores during a time of economic turmoil. Instead, traders might want to consider investments in department stores, which are better equipped to handle inflation with their essential products. Walmart (WMT), TJX Companies (TJX), and Costco (COST) are all Strong Buys with solid upside potential.
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