Dive Brief:
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Joann on Wednesday said it has filed under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware, with a plan to sell itself.
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The crafts retailer, whose stores and e-commerce site remain open for business, is asking to court to approve a sale of “substantially all of its assets,” with Gordon Brothers as a stalking horse bidder.
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Joann filed for bankruptcy last March, exiting in April as a private company owned by its creditors. According to court documents filed this week, its liabilities range between $1 billion and $10 billion.
Dive Insight:
As Joann lands in bankruptcy court for the second time in less than a year, Interim CEO Michael Prendergast cited “significant and lasting challenges in the retail environment,” along with the retailer’s own financial challenges and “constrained inventory levels.”
“After carefully reviewing all available strategic paths, we have determined that initiating a court-supervised sale process is the best course of action to maximize the value of the business,” he said, adding that the hope is to find a way for the crafts retailer to continue to operate as a going concern.
For now the company “intends to uphold its commitments to customers, Team Members, and partners, including continued payment of employee wages and benefits,” per its press release.
Joann last week confirmed the closure of stores in various states that the company described as “part of routine store location evaluation and optimization.”
The challenges with inventory made it particularly vulnerable, according to GlobalData Managing Director Neil Saunders.
“Inventory issues have created out-of-stocks and gaps in assortments — which has weakened its specialist status in the fabric and textiles space and caused customer defections,” he said in an email. “The experience in many stores is also subpar, which has damaged sales.”
When Joann emerged from bankruptcy last time, it had very little room to maneuver because it still had debt, according to Saunders.
“While it reduced its debt burden, it did not eliminate it, which meant it had very little room for error in terms of execution,” he said. “Sadly, Joann has been found wanting on several fronts, and it has now run out of oxygen again.”
