Craft chain Joann to shutter most locations amid financial woes

Joann, a well-known craft and fabric retailer, has made the difficult decision to shutter approximately 500 of its locations across the United States as it struggles with declining sales and market share.

The decision comes alongside Joann's second filing for Chapter 11 bankruptcy in less than a year, setting the stage for store closings and a court-supervised sale process aimed at maximizing its business value, as NPR reports.

Significant Retail Presence Set to Shrink

The Cleveland-based chain, which once boasted a substantial retail footprint, is now poised to lose over 60% of its stores. This reduction will affect nearly every state, with significant closures anticipated in California, Florida, Pennsylvania, and Ohio.

Initially, when Joann filed for bankruptcy in March last year, it confidently announced that its 800 stores would remain open despite its substantial debt load. However, a continued slump in sales has forced a reevaluation of its strategy. This retrenchment process underscores a broader issue within the retail industry, where Joann has struggled to maintain competitive ground against rivals such as Hobby Lobby and Michaels.

Joann Faces Competitive Pressures

Hobby Lobby and Michaels have emerged as dominant competitors with Hobby Lobby operating 1,000 stores and Michaels surpassing 1,200 stores. Joann's aging locations, highlighted by retail analyst Neil Saunders, suffered from inventory shortages, sending potential customers to its competitors.

According to Saunders, the second bankruptcy attempt, while reducing and restructuring some debt, left the company still grappling with financial strain. "A lot of stores were very shabby," he observed, noting that ongoing issues had "trained customers to go elsewhere." These challenges built over time as Joann fought to balance its debt obligations and maintain its market presence.

Right-Sizing and Bankruptcy Strategy Explained

Interim CEO, Michael Prendergast, announced Joann's recent bankruptcy filing on Jan. 15 and highlighted the "difficult retail environment" and constrained inventory levels as influential factors in their decision.

Prendergast further explained that after reviewing strategic options, the company determined that a court-supervised process would be the most beneficial way to maximize business value. This strategy appears aimed at safeguarding the company's remaining assets while strategically positioning itself for an eventual sale or future operations on a smaller scale.

Joann's Steps to Address Challenges

The ongoing restructuring of Joann signifies a major turning point for the company, focusing on "right-sizing our store footprint" as a "critical part" of efforts to stabilize its future. Joann's official statement acknowledged the "major impact" of these closures on its team members, customers, and the communities the stores have served for years. Such large-scale changes invite a broader discussion about the fluctuating dynamics of brick-and-mortar retail.

Many stakeholders continue to watch closely as Joann navigates through its financial challenges and works towards preserving its brand value amid fierce market competition.

Future Prospects and Lessons Learned

Saunders reflected on Joann's journey, stating it is "a very unfortunate conclusion to a very long process of decline." He highlighted the challenges of closing unprofitable locations and putting the business on a surer financial footing.

The end result, according to Saunders, is a "much smaller business," raising questions about the long-term sustainability of Joann's operations post-bankruptcy. Joann's situation underscores a significant trend in the retail industry where companies must constantly adapt to changing consumer preferences and competitive pressures.

Impact on Craft Retail Industry

As Joann proceeds with its planned closures and sale efforts, the impact on the craft retail industry is palpable. With Hobby Lobby and Michaels positioned to further seize market share, Joann's once-prominent presence diminishes.

The steps Joann is taking may provide valuable insights for other retailers facing similar financial pressures and competitive shifts. Whether the chain can emerge stronger or ends up a cautionary tale remains to be seen.

The company's final path and its effect on the broader fabric and craft industry will be keenly observed by competitors and consumers alike in the coming months.