Joann announced this Wednesday that, for the second time in a year, it has filed for bankruptcy under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware, which has sparked uncertainty about the future of its stores.
Currently, the craft retailer’s stores and its e-commerce platform continue to operate as usual while the company seeks court approval to sell most of its assets.
Why did Joann file for bankruptcy?
The company filed for bankruptcy last March, emerging in April as a private entity owned by its creditors. According to recent court documents, its liabilities range from $1 billion to $10 billion.
In a statement, the company explained that, after emerging from bankruptcy previously, it faced significant limitations due to its high debt, leaving little room for operational mistakes. However, Joann was unable to overcome several challenges and is now once again in a state of insolvency.
Inventory-related issues have resulted in stockouts and shortages, affecting its reputation as a leader in the fabric and textile sector, which has led to a loss of customers.
“After carefully reviewing all available strategic options, we have determined that initiating a court-supervised sale process is the best course of action to maximize the value of the business,” the statement read.
ALSO READ Pepsi launches new Wild Cherry & Cream flavor; when will it be on sale?
Will Joann stores close?
Currently, the company plans to honor its commitments to customers, employees, and partners, ensuring the continuity of wage and benefits payments to its staff. However, it has confirmed the closure of several stores in various states across the country.
Which Joann stores will close?
For now, the company has not specified which stores will be closing, but all signs point to closures affecting the New York metropolitan area and Pennsylvania. The affected stores will close no later than Sunday, January 19.
In Bucks County, stores located in Court at Oxford Valley, Falls, Broad Street, Quakertown, and Easton Road in Warrington will remain open. Additionally, two locations in Philadelphia will stay operational.
Which U.S. stores could file for bankruptcy in 2025?
Some of the retail chains that could face bankruptcy this year include the following:
- Beyond
- Everlane
- Glossier
- Backcountry
- Madison Reed
- Family Dollar
- CVS, Walgreens, and Rite Aid
- Advance Auto Parts
- 7-Eleven
- Walgreens
- Foot Locker
What is Chapter 11 of the U.S. Bankruptcy Code?
Chapter 11, commonly known as the “reorganization chapter”, allows businesses, partnerships, or individuals to restructure their assets and liabilities appropriately without having to sell off all their assets.
Who can seek protection under Chapter 11?
U.S. law allows any company or individual with a domicile, business establishment, or assets in the country to request judicial supervision to restructure their finances and operations under the provisions of Chapter 11.
There is no minimum or maximum value for the assets of a foreign company in the U.S. to be eligible for Chapter 11 protection under U.S. Bankruptcy Law.
In certain cases, deposits held by the legal firm managing the process in the U.S. may be considered assets, making the debtor eligible to seek Chapter 11 protection.
What benefits does Chapter 11 offer?
This section serves as an alternative to penalties, meaning that the company or individuals seeking it can avoid immediate dissolution, liquidation, and drastic cuts. During this process, the law allows the entity to continue operating and restructure without pressure from creditors. At the same time, it enables them to negotiate and propose a repayment plan for their debts.
Moreover, reorganization procedures under Chapter 11 offer the advantage that the company’s management retains control over the business, making the reorganization plans generally more effective, as the executives who stay in charge are the ones best familiar with the company, partnership, or individual involved.
