Consumers have a deep connection to certain retailers. When a chain caters to your hobbies or delivers an enjoyable shopping experience, that builds the connection between retailer and consumer.
Shoppers mourned the loss of Borders Books, for example, because the chain wasn't just a place where people shopped. It was a store where people lingered over books, had a cup of coffee or a snack, and talked with staff and other customers about books.
Related: Struggling big name brand files Chapter 11 bankruptcy
Recently liquidated retailers Christmas Tree Shops, Bed Bath & Beyond and Tuesday Morning had similar connections with customers but for a different reason. Shoppers at those so-called treasure hunt stores enjoyed the process of never knowing what they might find on the shelves.
But it might be fair to say that the connection between a chain like Borders or Waldenbooks, which caters to people's hobbies and passions, is deepest. Their disappearance hits customers harder because they did not just lose a store, they lost a gathering place.
Customers of Joann (JOAN) -), a brand focused on crafts like sewing, would likely feel the same way if the retailer can't right its financial ship. The company has been struggling, and without a strong holiday season, a number of factors suggest a Chapter 11 bankruptcy filing remains a clear possibility.
Image source: Getty Images.
Joann faces a cash crunch
In addition to appearing in the top spot on RetailDive's list of retailers that need a strong holiday season, Joann has also gotten a major negative rating from CreditRisk Monitor.
The struggling chain recently had its CreditRiskMonitor Frisk Score lowered to a 1. Based on history, companies that get a 1 have between a 10% and 50% chance of filing for bankruptcy.
The chain has not hidden its struggles, but the picture has grown bleaker in recent months. Joann has received a delisting notice from the Nasdaq, has more than $1.1 billion in debt and does not have a permanent CEO.
Third-quarter sales dropped 4.1% and the company's loss widened to $21.6 million from $17.5 million, both from the year-earlier period.
Chief Financial Officer Scott Sekella described the chain's financial picture during its third-quarter-earnings call:
"Our cash and cash equivalents were $28.3 million at the end of the third quarter. As of October 28, 2023, we had $72.1 million of availability on our revolving credit facility. Our face value of debt, net of cash, at the end of the third quarter was $1.14 billion. This reflects an increase of $90 million from the same period last year."
Joann has a turnaround plan
Joann's interim leadership team has been working to cut costs and improve sales. Chief Customer Officer Chris DiTullio addressed those efforts during the call.
"Our third quarter paired a focus on operational retail fundamentals with an agile data-driven approach, helping us to win in our core categories while overdelivering on the implementation and execution of our Focus, Simplify, and Grow cost-savings initiative," he said. "This has enabled us to stabilize the overall business, rightsize our expense structure, and capitalize on trending growth areas."
DiTullio tried to paint the quarter's results as a positive step. Like officials with many struggling retailers, he attributed some of the company's difficulties to the economy.
"With continued progress and another quarter of strong execution against our strategic priorities, we were able to deliver these results despite what remains a dynamic and challenging consumer and discretionary retail environment," he added.
And DiTullio did his best to show that Joann was headed in the right direction.
"We remain focused on controlling what we can control while maximizing our opportunities in this market and delivering a great customer experience, both in-store and digitally," he said.
As of the market open on Dec. 13, Joann's stock was trading at 54 cents a share, well below the $1 it needs to maintain to stay on the Nasdaq.
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