Drowning in loans, Ohio-based retailer Joann has filed for bankruptcy.
Unable to keep up with its debt obligations, the retailer, which maintains 850 stores and an online site, is expected to complete bankruptcy restructuring as early as April. According to the company, its storefronts and online shop will continue operating as normal.
Joann will be delisted from public markets and taken under private ownership following the restructuring. As of around 12 p.m. on March 18, the stock was down more than 17% from its opening price. On a one-year basis, the retailer’s shares have lost over 90% of their value.
The news of Joann’s debt issues comes amid slowing discretionary spending among consumers, a spending category that is predicted to continue to deteriorate. This would further hurt the fabric and crafts chain, which saw a surge in sales during the pandemic when consumers were spending more money on activities at home.
“February retail sales provide further proof that spending on discretionary goods in 2024 is likely to be soft following several years of strong growth and as consumer health – albeit still relatively strong – is somewhat weighed down by inflation and reduced savings,” said senior director at Fitch Ratings, David Silverman, per The Wall Street Journal.
Joann’s will obtain $132 million in new financing as part of the restructuring process, helping the company reduce roughly $505 million worth of existing debt. Certain loans and credit facilities will also be extended as part of the deal.
With interest rates historically high and inflation still elevated, companies like Joann’s, which rely on discretionary spending, say consumer habits are shifting. Still, the company hopes the restructuring process can help it emerge from its current debt troubles.
“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,” said the company’s chief financial officer and co-lead of the interim office of the CEO, Scott Sekella.
