A major shift in the specialty retail landscape has left valuable market share up for grabs, and Michaels is moving quickly to capture it.
The arts and crafts retailer has been expanding into categories once dominated by two competitors that have exited the retail market, using new products, dedicated shop-in-shop concepts, and events to attract customers who have fewer specialty destinations than they did before.
The strategy comes as retailers continue to adjust to the fallout from the bankruptcies and store closures of leading brands, which reshaped the fabric, sewing, and party-supplies markets. Michaels has increasingly positioned itself to compete for some of the demand those exits left behind.
Founded in 1973, The Michaels Companies Inc. is one of North America’s largest specialty retail chains for arts, crafts, and décor, operating more than 1,300 stores across 49 states and Canada, as well as through its e-commerce platforms.
Michaels expands its Knit & Sew Shop after Joann bankruptcy
Michaels has expanded its Knit & Sew Shop, adding more than 1,600 new products across fabric, yarn, sewing, and needlecraft, and making the expanded assortment available in over 1,200 stores nationwide, according to a company announcement.
The move comes a little more than a year after Michaels acquired Joann’s intellectual property in June 2025, following the fabric retailer’s bankruptcy filing earlier that year.
Fabric is now available in nearly 90% of Michaels stores, with more than 400 new fabric products covering categories including quilting, cosplay, and special occasions.
Michaels is also introducing shop-in-shop experiences featuring Big Twist and DMC Embroidery Threads, expanding its assortment with products and experiences aimed at sewing and needlecraft customers.
The retailer is further leaning into the category with a lineup of in-store events throughout September for National Sewing Month. The schedule includes community meet-ups, open classrooms, product demonstrations, online classes, and free sewing experiences.
“We’re investing in The Knit & Sew Shop to give today’s shoppers more of what they love, while making these crafts more approachable for anyone who wants to learn,” Michaels CMO Stacey Shively said in a statement.
Michaels moves into the space left by Joann and Party City
Michaels debuted The Knit & Sew Shop and The Party Shop inside select locations in late 2025 as it looked to expand its presence in categories where major competitors had disappeared from the retail landscape.
The move gave Michaels an opportunity to compete for customers and sales that had previously been served by Joann and Party City, both of which filed for Chapter 11 bankruptcy and ultimately closed their standalone stores.
In June 2025, Michaels acquired Joann’s intellectual property and private-label brands, although the deal did not include any of the bankrupt retailer’s physical stores.
Michaels also attempted to acquire Party City during its bankruptcy auction but was outbid by New Amscan, an affiliate of Ad Populum. New Amscan ultimately acquired Party City’s intellectual property and wholesale operations.
Joann and Party City had long been prominent players in their respective categories. Both companies, however, faced a combination of post-pandemic economic pressures, changing consumer habits, increased competition, and significant debt before their businesses deteriorated.
The exits left fewer established specialty retailers serving shoppers in categories that overlap with Michaels’ existing business.
“The first thing that we concluded was there was tremendous disruption in the marketplace with the exit of Joann Fabric and the exit of Party City — and that job one was to go after that,” Michaels CEO David Boone said at the ICR Conference in January, as reported by Retail Dive.
“We have introduced a Party Shop by Michaels in every single store in our fleet, and we’ve introduced the Knit & Sew Shop in every single store in our fleet.”
Michaels uses rivals’ exits to gain market share
Michaels had spent years competing with retailers such as Hobby Lobby and Walmart for customers in the arts-and-crafts market. The disappearance of Joann and Party City, however, has given the company an opportunity to expand into adjacent categories where it already has an established store base and customer relationships.
In 2021, private equity firm Apollo Global Management acquired Michaels, adding the retailer to its portfolio of consumer and other businesses. While Apollo Global Management does not publicly disclose financial results, Bloomberg reported in July 2026 that Michaels’ first-quarter sales and adjusted earnings grew by double digits, citing people familiar with the matter.
The broader assortment has also required Michaels to carry more merchandise. According to the same Bloomberg report, the retailer increased its inventory by 20% as it expanded its selection.
Tariffs on imported goods have added another cost consideration for retailers managing merchandise expenses.
Here’s some of my previous coverage of retail strategy:
- Clothing retailer closes nearly all stores, leaving just 4
- 116-year-old retailer closes 14 stores and that’s just the beginning
- Walmart builds a whole new kind of store
The opportunity created by Joann and Party City’s exit is also attracting other retailers.
GlobalData Retail Managing Director Neil Saunders said that “a lot of demand is up for grabs” now that both chains are gone. Michaels, however, has an advantage because sewing and party supplies are closely aligned with its existing business.
“Many retailers are trying to take a slice of this, including generalists like Walgreens and Five Below,” Saunders told CNN. “However, party and sewing are more in Michaels’ ballpark and if it executes with authority it can take a good level of share in a way that retailers dabbling in the space won’t be able to do.”
Taken together, Michaels’ expanded assortment, dedicated shop concepts, and investment in classes and community events suggest the retailer is seeking to become a larger destination for customers with fewer specialty options than before Joann and Party City exited the market.
Related: After Joann and Party City bankruptcies, a new player steps in
