When a retail chain has a loyal following, it has significant value even when it runs into financial trouble.
A bankruptcy filing does not always mean that a company not longer has a following. In recent years, you can blame leveraged buyouts for many retail bankruptcies.
Related: Another popular pizza chain files Chapter 11 bankruptcy
That’s when the acquiring company uses the assets and resources of the company, they are buying to pay for the purchase. In many cases, that creates a situation where the company cannot service its debt, even though it still has healthy sales
In other cases, added debt from the Covid pandemic has put retailers in a situation where they can’t pay their bills. That does not mean the company isn’t still popular.
Brands like Tuesday Morning and Christmas Tree Shops had devoted followings, but the combination of a slight slowdown in sales and the added debt from the pandemic shut down was too much to carry.
A popular retailer, however, can often get multiple chances. Both Bed, Bath, and Beyond and Pier 1 Imports were able to bring it outside money multiple times to put off bankruptcy. Party City was able to emerge from chapter 11 bankruptcy only to run out of cash just a few months later.
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Joann, the fabrics and craft retailer, remains popular with its fanbase. That made it possible, if not likely that another party might buy the brand even as it went through going out of business sales.
This is the second bankruptcy filing for Joann
Image source: Getty Images.
Where Joann stands now
Joann filed for Chapter 11 bankruptcy protection in January after emerging from bankruptcy only 11 months earlier. In its second filing, the company moved pretty quickly from filing to beginning to wind down its stores.
Now, the chain is nearing the end at some locations.
The chain has been offering going-out-of-business sales at all of its stores selling items at 40-70% off.
When the chain filed its second Chapter 11 bankruptcy petition, it was hopeful that a buyer could be found.
“The company is seeking court approval to commence a process for the sale of substantially all of its assets under Section 363 of the U.S. Bankruptcy Code pursuant to which Gordon Brothers Retail Partners, LLC would serve as the ‘stalking horse’ bidder. The proposed transaction is subject to higher and better offers, among other conditions,” it shared in a press release.
More bankruptcies:
Popular restaurant and bar chain files for Chapter 11 bankruptcyPopular athletic shoe chain files for Chapter 11 bankruptcyAward-winning cosmetics brand files for Chapter 11 bankruptcy
Gordon Brothers is a liquidation company which serves as a sort of buyer of last resort. Joann was hopeful that a better offer — one which would at least keep some stores open — would emerge.
“The company continues to actively solicit alternate bids. If other qualified bids are submitted during the court-supervised sale processes, the company plans to conduct an auction or auctions, with the stalking horse bid setting the floor for the auction processes,” it added.
That has not happened.
Joann begins to close down stores
Going-out-of-business sales are winding down at over 250 Joann stores, which will shit down before or around May 1. About 500 other locations will shut down by the end of May.
This is not the result Joann Interim CEO Michael Prendergast had hoped for.
“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…We hope that this process enables us to find a path that would allow Joann to continue operating as a going concern,” he said.
Related: Retail giant closing all locations after bankruptcy talks fail
It remains possible that a buyer could swoop in at the last minute or after the chain’s stores have closed. A number of retail brands including Bed Bath and Beyond and Big Lots have closed down only to quickly reopen in a different form under new owners.
For now, however, the end appears to be near for Joann as we know it.
