• by Sarah Mahoney , January 15, 2025

Joann, the largest sewing and fabric store in the U.S., has filed for Chapter 11 bankruptcy protection, the second time it has done so in less than a year.

The company hopes to sell all assets to Gordon Brothers, an asset and liquidation specialist, in a “stalking horse” transaction. That means Joann can continue to solicit higher and better offers. If any materializes, Joann can then auction off assets, with the Gordon Brothers offer setting the floor.

While Joann would undoubtedly rather stick to its knitting than deal with stalking horses, the clock is running out on the Hudson, Ohio-based retailer, which has 30 days to come up with $450 million owed to lenders.

Joann also filed for Chapter 11 protection last March, emerging in just six weeks with a plan that let it retain 800 stores and cut debt almost in half to $555 million. At that time, the company said it was well-positioned to recover.

However, the balance of 2024 turned out to be much more punishing for many retailers, especially those with overly leveraged balance sheets. So far this year, companies like Party City, the Container Store and Big Lots have also been pushed into bankruptcy.

“Since becoming a private company in April, the Board and management team have continued to execute on top- and bottom-line initiatives to manage costs and drive value,” said Michael Prendergast, Joann’s interim CEO, in the announcement. “However, 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.”

He added he hopes the bidding process can lead to a path that allows the company to continue operations.

But observers aren’t counting on that.

“When Joann emerged from bankruptcy last year, it did so with breathing space rather than a complete solution to all its problems,” writes Neil Saunders, managing director of GlobalData, in his note on the filing. “While it reduced its debt burden, it did not eliminate [that burden], which meant it had very little room for error in terms of execution.”

Inventory issues – always a problem for stores that are teetering close to insolvency – “created out-of-stocks and gaps in assortments and caused customer defections,” Saunders says. “Unless it can find a buyer for the business, Joann’s future now looks very uncertain.”