Craft supplier Joann to close 60% of its stores across U.S. as it looks for a buyer

Joann, the fabric and craft chain, plans to close about 500 stores across the country — more than 60% of its retail outlets — as slumping sales and declining market share have forced the company into its second Chapter 11 bankruptcy in less than a year.

The company, known for fabric by the yard and its variety of yarns, said in a statement that it is seeking court authority to shutter stores in nearly every state, with California, Florida, Pennsylvania and Ohio among the states with the most closures.

"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," it said. "Right-sizing our store footprint is a critical part of our efforts to ensure the best path forward for Joann."

In March last year, the Hudson, Ohio-based company filed for bankruptcy protection, reporting about $1 billion in long-term debt. At the time, however, it said its 800 stores would remain open. Last month, the company announced yet another bankruptcy filing, saying the move was in preparation to sell the company.

Retail analyst Neil Saunders said that going into the first bankruptcy, Joann's debt levels were already unsustainable. "Into the second bankruptcy, the debt levels had been reduced and the debt had been restructured, but it was still quite punishing," he said.

Saunders, who is managing director of GlobalData, said Joann also struggled to maintain inventory, as suppliers became increasingly reluctant to do business with a company that looked in trouble.

"A lot of stores were very shabby," Saunders said. "There were a lot of out of stocks, and of course, that just trains customers to go elsewhere."

As a result, Joann has lost market share to online retailers and bricks-and-mortar competitors such as Hobby Lobby and Michaels, he added.

Hobby Lobby says it has about 1,000 stores in 48 states and employs around 46,000 workers. It reportedly took in $8 billion in revenue last year. Michaels says it has more than 1,200 stores in the U.S. and Canada. Neither company is publicly traded.

In a statement announcing Joann's second bankruptcy filing on Jan. 15, interim CEO Michael Prendergast, acknowledged that "the last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step."

"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. We hope that this process enables us to find a path that would allow JOANN to continue operating as a going concern," Prendergast said.

Saunders, the retail analyst, said it was difficult to see how Joann could recover from its current troubles short of a buyout. "It's a very unfortunate conclusion to a very long process of decline," he said. "You can shut unprofitable locations, you can try to put the business back on a surer financial footing, but the end result is that you are then a much smaller business."

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