JOANN, a retailer in sewing, fabrics and arts and crafts, has filed for Chapter 11 bankruptcy for the second time in less than a year. The move, announced in a press release on January 15, aims to facilitate a sale process under court supervision to maximize the company’s value. JOANN’s stores and e-commerce platform will remain operational throughout the proceedings.
The bankruptcy filing comes less than a year after JOANN emerged from a prior Chapter 11 restructuring in April 2024, during which it reduced its funded debt by half and secured $153 million in exit financing. Despite these efforts, the company continues to face challenges stemming from changing retail dynamics and constrained inventory levels. Law360 reported that the retailer has $615.7 million in debt.
“Stalking Horse” Bid from Gordon Brothers
JOANN has secured Gordon Brothers Retail Partners, as a “stalking horse” bidder to set a baseline for the auction of its assets. This ensures a minimum bid while allowing other interested parties to submit competing offers. According to Interim CEO Michael Prendergast, the decision to pursue bankruptcy again reflects the company’s focus on finding a sustainable path forward.
“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,” Prendergast said. “We hope that this process enables us to find a path that would allow JOANN to continue operating as a going concern.”
Prendergast emphasized that the company remains committed to its employees and customers. “We are grateful for the dedication of our team members and the continued support of the creative communities we serve,” he added.
Financial Pressures Persist
The decision to file for bankruptcy follows a difficult year for JOANN, which had restructured its operations in 2024. The previous bankruptcy filing, characterized as a prepackaged process, resulted in a streamlined balance sheet and optimism for the company’s future. However, a challenging retail environment and lingering supply chain issues appear to have undermined those gains.
The company stated that it intends to seek approval for the consensual use of cash collateral to ensure sufficient liquidity to support its operations during the process. It has also filed motions with the U.S. Bankruptcy Court for the District of Delaware to uphold employee wages, benefits and customer commitments.
Founded more than 80 years ago in Cleveland, OH, JOANN operates over 800 stores across 49 states and a robust e-commerce platform. The company has long positioned itself as a leader in the sewing and crafting space, serving millions of customers, including sewists, quilters, crocheters, and other creative enthusiasts.
The bankruptcy proceedings mark a stark contrast to JOANN’s optimistic outlook in May 2024, when company executives touted its “strongest financial foundation in many years.” At that time, JOANN described its restructuring as a key step to drive long-term growth.
Next Steps
JOANN’s bankruptcy announcement highlights the volatility of the retail industry, particularly for businesses reliant on discretionary spending and seasonal demand. The upcoming court-supervised sale process will determine the future of the company, with Gordon Brothers’ stalking horse bid serving as a starting point for potential buyers.
Additional information regarding JOANN’s financial restructuring is available on the company’s dedicated restructuring website, JOANNRestructuring.com. Customers, employees, and stakeholders are encouraged to monitor updates as the process unfolds.
JOANN’s latest Chapter 11 filing reflects ongoing challenges in the retail sector, where shifting consumer behavior, economic uncertainty, and supply chain disruptions continue to create headwinds. Whether the company can find a buyer and continue to operate as a going concern remains to be seen.
