Joann Declares Bankruptcy Due to Consumer Slowdown but Intends to Maintain Store Operations

Fabric and crafts retailer Joann has declared bankruptcy due to waning consumer demand and higher operating costs. The Chapter 11 bankruptcy filing by Joann, based in Hudson, Ohio, includes between $1 billion and $10 billion in debt. Despite this, the retail chain plans to keep its 800-plus stores open while it goes through the restructuring process. Joann has secured about $132 million in new financing and expects to reduce its funded debt by about $505 million as part of the bankruptcy process.

Joann’s bankruptcy filing adds to the list of major retailers that have struggled and filed for bankruptcy in recent years, including GNC, J.C. Penney, and Party City. With the increasing shift of consumer spending to online rivals like Amazon.com, brick-and-mortar retailers have faced challenges. Joann’s initial boost during the early days of the pandemic as consumers took up crafts and projects at home was short-lived. Sales have since plummeted, with the company citing inflation, economic challenges, and consumer cutbacks as factors.

The company reported that sales slowed when COVID-19 restrictions were eased, demand for fabric and mask-related products decreased, and hobbyists spent less time crafting indoors. Additionally, the termination of pandemic-related stimulus programs by the federal government impacted Joann’s revenue. Higher costs from China raising tariffs on imports and increased spending on store remodeling have further strained the company. Rising ocean freight costs have also inflated inventory costs by over $150 million between 2021 and 2023 fiscal years, with Joann heavily relying on imported goods.

Despite facing challenges that have affected the retail sector as a whole, Joann emphasized the outsized impacts on the company due to its heavy reliance on imported goods. The filing reflects ongoing struggles for brick-and-mortar retailers facing changing consumer behavior and economic conditions. Joann’s new financing and reduction in funded debt are seen as significant steps to help the company continue operating its stores through the bankruptcy process. The future of Joann and its stores will depend on the success of its restructuring efforts and adapting to the evolving retail landscape.

Khristopher J. Brooks, a reporter for CBS MoneyWatch, has covered the bankruptcy filing of Joann, focusing on the factors that led to the retailer’s financial challenges. With experience reporting on the U.S. housing market, the business of sports, and bankruptcy issues, Brooks offers insights into the impact of Joann’s bankruptcy on the retail industry. As Joann navigates the restructuring process and works to address its debt, the company’s ability to adapt to changing consumer trends and economic conditions will determine its future viability in the competitive retail market.