Dive Brief:
- Joann is seeking court approval to close more than half of its locations nationwide, the company said Wednesday. The move comes about a month after the crafts and sewing retailer filed for Chapter 11, its second bankruptcy in less than a year.
- A court hearing to approve the request to close over 500 stores is scheduled for Friday, in bankruptcy court in Delaware. Pending court approval, Joann plans to begin going-out-of-business sales on Saturday, the company said in statements to vendors and customers.
- Joann could close entirely if it doesn’t find a suitable buyer at auction. The company said it is pursuing a sale, but stalking horse bidder Gordon Brothers intends to liquidate the entire company if it wins the auction.
Dive Insight:
After seeking bankruptcy protection for the second time in less than 12 months, it’s possible Joann may disappear from the retail and e-commerce landscape. Even if the Gordon Brothers bid doesn’t go through, though, Joann will be left with less than half of its footprint going in.
The group of stores slated for closure haven’t attracted any going concern bids during the bankruptcy process, so initiating closing sales will enable the company to immediately reduce its costs and begin shrinking its store footprint, Nicholas Haughey of restructuring firm Alvarez & Marsal said in court documents.
“This was a very difficult decision to make, given the major impact we know it will have on our team members, our customers and all of the communities we serve,” Joann said in a statement to Retail Dive. “A careful analysis of store performance and future strategic fit for the company determined which stores should remain operating as usual at this time. Right-sizing our store footprint is a critical part of our efforts to ensure the best path forward for Joann.”
A company spokesperson did not answer questions regarding the number of employees impacted.
In the meantime, Joann wants to take advantage of the upcoming holiday weekend to drive going-out-of-business sales momentum, Haughey said. “I understand that, historically, holidays are a period of increased revenue generation for [Joann] and that this is particularly true of holidays falling on an extended weekend that have historically been associated with retail-wide sales events, such as Presidents Day,” said Haughey. Missing that window, Haughey said, may diminish the opportunity to maximize potential revenue from store closing sales.
Joann used its prior bankruptcy to eliminate about $505 million in debt. It emerged from Chapter 11 weeks later as a privately held company. “Unfortunately, unanticipated inventory challenges post-emergence, coupled with the prolonged impact of an excessively sluggish retail economy, put Joann back into an untenable debt position,” interim CEO Michael Prendergast said.
The company employed about 19,000 people and had about 800 stores in 49 states in January.