Another major retailer has filed for bankruptcy protection, as consumers continue to reduce their discretionary spending as the economy continues to struggle.
Joann, the craft and fabric retailer, has already come to an agreement with most of its financial stakeholders and other creditors, which gives the company about $132 million of new financing. It also will reduce the total debt on Joann’s balance sheet by roughly $505 million, the company announced.
In the release, Joann’s chief customer officer, Chris DiTullio, said:
“Over the past several months, Joann has made meaningful business improvements through the execution of our Focus, Simplicity and Grow cost reduction initiative. We appreciate the support from our financial and industry stakeholders in this agreement, and their confidence in our ability to continue driving positive business change.
“There is no other retailer with the same ability to serve sewists, quilters, crocheters, crafters and other creative enthusiasts as we have for the past 80 years, and we take great pride in seeing the passion and engagement of our millions of customers and our team members.”
All across the country, retail sales have slumped over the last few months. In February, retail sales grew only 0.6% month-over-month, not including inflation. In January, it actually declined by 1.1%, as prices continue to rise and consumers peel away from non-essential items.
There are more than 800 stores that Joann operates throughout the U.S. The company said that 95% of those stores are cash flow positive.
It’s expected that Joann will continue to operate all its stores as well as its e-commerce websites during the bankruptcy filings and after. After the proceedings are over, though, Joann will probably become a private company and won’t be listed on the stock exchange any more.
Instead, they’ll be owned by some of the lenders that are part of the deal.
In the third quarter of 2023, net assets at Joann dropped by 4.1% year-over-year, all the way down to $539.8 million. The company’s most recent earnings report also showed that those numbers resulted in a net loss of $21.6 million.
As of October 28 of last year, the company’s long-term debt sat at about $1.15 billion.
In the release the company issued this week, Joann said that they could become a private company as soon as April. In the release, Scott Sekella, who’s co-lead of the interim office of the CEO and the company’s chief financial officer, said:
“This agreement is a significant step forward in addressing Joann’s capital structure needs, and it will provide us with the financial resources and flexibility necessary to continue to deliver best-in-class product assortments and enhance the customer experience wherever they are shopping with us.”
The company actually went private back in 2011, but then went public 10 years later, with an initial offering of $12 per share. On Monday, the company’s stock opened at only 25 cents.
