Loyal customers help a retail chain stay afloat and can sometimes even drive their business. Ollie's Bargain Outlets, for example, does not have to market its new store openings because its loyal customers, the so-called Ollie's Army, does it for them.
That's a very rare situation, Chick-fil-A may be the only other example of a customer base that loyal and powerful, but loyal customers are only one piece of the puzzle. Many retailers that had a strong following added to their debt load during the Covid pandemic and even when their sales returned to 2019 levels, their expenses exceeded their profits.
Related: Iconic retail chain closing all stores, liquidating
Things could have gone back to exactly what they were before the pandemic and the company could be in trouble because of interest costs. In addition, once a company has cash flow issues, vendors can tighten terms or even demand cash upfront.
That's a cycle that claimed Christmas Tree Shops and Tuesday Morning, two "treasure hunt" retailers that had loyal customer bases that could not catch up on their added debt after Covid. Both of those companies filed Chapter 11 bankruptcy but ultimately moved to Chapter 7 bankruptcy liquidation.
Surviving a Chapter 11 bankruptcy filing requires new funding, vendors willing to forgive certain debt, or creditors being willing to exchange debt for equity. That's never certain, even when a company enters Chapter 11 with a plan in place, but Joann (JOAN) , a popular nationwide chain with a loyal following, has emerged from Chapter 11 bankruptcy.
Image source: Getty Images.
Joann exits Chapter 11 bankruptcy
Joann entered the Chapter 11 process with a plan designed to reduce its debt. That's exactly what happened, according to the company.
"Joann, the nation’s category leader in sewing and fabrics with one of the largest arts and crafts offerings, has successfully emerged from its court-supervised financial restructuring process, and has substantially reduced its funded debt by half while further enhancing its liquidity through a $153 million exit financing facility that replaces the previously announced debtor-in-possession financing," the company shared in a media release.
Basically, this is a case of the Chapter 11 bankruptcy process working exactly as it's supposed to. The company filed for bankruptcy protection with the intention of the process going exactly as it did.
More bankruptcy:
- Key healthcare product maker files for Chapter 11 bankruptcy
- National retail chain closing all stores in bankruptcy
- Another drugstore chain files for bankruptcy
"The prepackaged Chapter 11 plan was supported by the company’s lenders, creditors, and industry partners, and became effective April 30, 2024, enabling Joann to be in its best financial position in recent history," the company added.
What's next for Joann
Fans of the brand are most likely very excited by the news, because the sewing and crafting community would have had to rely on websites and much smaller stores had Joann gone out of business.
The company never changed its operations and has no plans to make major changes going forward.
"As previously announced, there were no store closures or layoffs in connection with this process. From yarn and fabrics to crafts and home décor, Joann continues to serve as a one-stop destination for creativity in its more than 800 stores, on Joann.com and on its mobile app," the company shared.
Joann's next move may be to find a CEO as it currently has its CFO and chief customer officer acting jointly as the interim leaders of the brand.
“For more than 80 years, Joann has been a leader in the textiles, sewing and craft industries, and we are now moving forward on the strongest financial foundation in many years. I am confident in this company’s unique ability to continue serving and inspiring handmade happiness with our millions of loyal customers for a long time to come,” said Chief Customer Officer Chris DiTullio.
The bankruptcy process was quick and moved from filing to finished in less than 45 days. After its Chapter 11 filing and joint plan of reorganization was confirmed by the court on April 25 with a unanimous support from all voting creditors, the company has been taken private.
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Shareholders, as is usually the case in a Chapter 11 bankruptcy filing, did not get anything for their shares.
