TSL Express Daily News

In recent years, consumers have had to face the realization that the retail stores they’ve grown to know and count on can disappear overnight. Store closures of this kind have been happening for decades, and now JOANN Inc., the fabric and craft store, might be the next retailer facing extinction.

In October, Jo-Ann Stores, or JOANN, had its CreditRiskMonitor FRISK Score updated. This score generally has a 96% accuracy in predicting bankruptcies for public U.S. companies, and JOANN “has been given a score of 1, which is the worst possible score,” according to The Sun. This suggests a 9.99% to 50% probability of bankruptcy within the next 12 months. Other retailers that received a score of 1 include Rite Aid, Rent the Runway, and Farfetch.

JOANN has a rich history as an American company founded in 1943 by German immigrants in Cleveland, Ohio, and it has approximately 850 stores in 49 states as of 2023. During the pandemic, the company did well thanks to more Americans picking up new craft hobbies, but it hasn’t been able to keep up the same momentum since. Seeking Alpha stated in December of last year that “JOANN has declining sales, comps, margins, and yet increasing costs.”

After experiencing a disappointing financial outcome in the second quarter of 2023, JOANN’s metrics reflected a decline. During the 13-week span leading up to July 29, the company observed a 2.1% decrease in net sales, amounting to $453.8 million, in comparison to the same duration last year. Furthermore, the net loss deepened, reaching $73.3 million as opposed to the prior year’s $56.9 million. In response to these challenges, the company emphasized its commitment to exploring avenues to enhance profitability, foster revenue growth, and streamline operations. As a result, JOANN has already laid off an unspecified number of employees.

Although JOANN “has over $1 billion in debt and saw its interest expense double over the past six months from $27.7 million to $52.1 million, the company believes it can survive. It detailed its financing picture in its SEC filing,” according to The Street.

The Street shared a statement from JOANN explaining that the company believes in its three principal sources of liquidity: cash, cash equivalents on hand, and cash from operations and available borrowings under the company’s ABL (asset-based loan) Facility. These sources are purported to cover JOANN’s working capital, capital expenditures, debt service requirements, dividends, and share repurchases. Executives also believe they can obtain alternative financing sources if necessary.

Currently, JOANN has no appointed CEO. The company’s previous CEO, Wade Miquelon, retired in May, and Chris DiTullio and Scott Sekella are serving as co-lead interim CEOs while they search for a permanent replacement.

Shoppers have made efforts to share their dissatisfaction with the retailer. One Redditor created a long post with photo examples detailing their critiques of how their purchased JOANN products are of ever-increasing poor quality. Best Life also shared an article that revealed warnings from previous JOANN employees. One revelation is how a majority of employees are not properly trained and have no knowledge of sewing.

It seems as if the company’s problems are mounting quickly, but only time will tell whether JOANN will be facing bankruptcy in the coming months.