S1.C70. TELL ME WHY - Joann

BY PHUONG ANH - Joann files for bankruptcy again amid inventory disruptions, debt pressure, and declining sales, highlighting deeper operational missteps in adapting to post-pandemic retail realities.

Joann, a long-standing American retailer known for its fabrics and crafting supplies, has filed for Chapter 11 bankruptcy protection for the second time in less than a year. Founded over 80 years ago, Joann’s latest filing reflects not just internal financial and operational mismanagement, but also a wider industry trend—traditional brick-and-mortar retail struggling to adapt in a fast-evolving consumer landscape.

The company’s most recent bankruptcy, filed in January 2025, comes amid sluggish sales and serious inventory management issues. In court documents, Joann cited an “unexpected ramp-down, and, in some cases, the entire cessation of production” of key merchandise, which drastically impacted sales. Without access to critical inventory, Joann found itself unable to meet customer demands—particularly problematic in a business where seasonal trends and craft-specific supplies are key drivers of revenue. The absence of popular stock directly fed into a larger crisis: a staggering $615 million debt load that became “untenable,” according to the company.

Joann’s interim CEO, Michael Prendergast, acknowledged that a confluence of long-term retail challenges and financial pressure drove this move. Inflation and the general tightening of consumer discretionary spending have affected many retailers, but Joann’s problems are deeper than macroeconomic trends. The company failed to capitalize effectively on the temporary pandemic-era boom, when homebound consumers turned to arts and crafts for entertainment. As life returned to normal, this trend reversed, exposing pre-existing weaknesses in Joann’s business model.

Experts like John Bringardner from Debtwire noted that Joann may have missed a critical opportunity during its first bankruptcy in March 2024. Instead of closing underperforming locations or restructuring aggressively, Joann maintained its footprint and operations. This arguably left the company vulnerable to the very market and operational pressures it now cites as reasons for its collapse. Bringardner predicts that if a new bidder does not emerge during this second bankruptcy auction, Gordon Brothers Retail Partners—the current stalking horse bidder—will likely oversee a wind-down, resulting in going-out-of-business sales and widespread layoffs.

Joann’s story also reflects a larger issue in retail: the decline of brick-and-mortar outlets that fail to adapt quickly enough to changing consumer behavior and digital transformation. Even loyal shoppers have increasingly migrated to rivals like Hobby Lobby and Michaels, or turned to e-commerce options that offer better convenience, variety, and pricing. The failure to modernize or differentiate Joann’s in-store experience, coupled with supply chain fragility, made the brand vulnerable to external shocks and shifts in consumer sentiment.

Despite the dire financial picture, Joann has stated its intention to remain operational throughout the restructuring process. Stores and its website will remain open, and employee wages will continue for the time being. However, the broader outlook remains grim. The lack of decisive action during its previous bankruptcy, poor inventory control, and a misaligned response to market changes may have set Joann on an irreversible path.

In conclusion, Joann’s second bankruptcy serves as a cautionary tale for legacy retailers. Operational agility, supply chain resilience, and customer-centric reinvention are no longer optional—they are necessary for survival in today’s retail environment. Without a bold turnaround or acquisition, Joann may soon become another name in the growing list of once-beloved brands lost to retail disruption.

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Here are 3 questions for you :

1. "How can we align our inventory planning with actual consumer demand patterns and supplier reliability?"
   Joann admitted to “unexpected cessation of production” for key items. A more dynamic demand forecasting and supplier diversification strategy could have reduced their exposure.

2. "What retail footprint is sustainable post-pandemic, and how should we optimize underperforming stores?"
   They chose not to close stores during their first bankruptcy — a critical opportunity missed. Proactively resizing or repurposing locations might have reduced overhead and improved financial health.

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3. "How are we differentiating our value proposition and adapting to changes in customer buying behavior, especially online?"
   As competitors like Michaels and Hobby Lobby pulled ahead, Joann could have rethought customer engagement, digital channels, and exclusive product offerings to maintain loyalty.

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Provide the question# on your comment when you answer.

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