In recent years, consumers have been forced to curb their spending to cope with high levels of inflation. A mid-2024 TD Bank survey found that 30% of Americans were cutting their spending due to economic concerns.
Not surprisingly, shifting consumer spending habits have forced a number of well-known retailers into bankruptcy.
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Big Lots filed for Chapter 11 in September 2024, citing high costs and sliding sales. Party City, meanwhile, filed for bankruptcy a second time in December of 2024, pointing to persistent inflation and stiff competition as factors leading to its demise.
Related: Formerly bankrupt giant retail chain closing more stores
Retail bankruptcies aren’t guaranteed to lead to store closures, but that’s often an end result. In the course of restructuring, it’s common for struggling retailers to shutter underperforming locations and reduce their overall footprint.
Store closures can be painful for mall and shopping center operators that can’t afford vacancies at a time when brick-and-mortar retail is slowly dying. But given consumers’ preference for big-box stores or online shopping, it only seems inevitable that store closures will be a recurring theme in 2025, especially if inflation remains stubbornly elevated.
Bankrupt retail chain is closing 500 locations.
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A bankrupt retailer makes a strategic decision
In March 2024, fabrics and craft retailer Joann filed for bankruptcy, citing slowing sales and a declining customer base. After emerging from bankruptcy roughly one month later as a private company, Joann proceeded to file for Chapter 11 again in mid-January.
This time around, Joann pointed to inventory issues as a driver. The company said it faced an “unexpected ramp-down, and, in some cases, the entire cessation of production” of some of its key products.
Related: Popular bankrupt retail chain finds buyer for brand and assets
In conjunction with its second bankruptcy filing, Joann said it would seek a sale of substantially all of its assets. It was quick to announce at the time that its stores and website would remain open while it sought out bidders.
Shortly before its second Chapter 11 filing, Joann identified 10 stores to shutter as part of its “routine” process. But on Feb. 12, Joann announced that as part of the bankruptcy process, it was moving forward with plans to close 500 of its 800 stores in operation.
Although the company did not provide a list of specific locations, court filings reveal that Joann locations are shuttering in all 50 states, with larger numbers of closures in New York, Washington, Pennsylvania, California, Florida, Michigan, and Indiana.
“This was a very difficult decision to make, given the major impact we know it will have on our team members, our customers and all of the communities we serve,” a Joann spokesperson said. “Right-sizing our store footprint is a critical part of our efforts to ensure the best path forward.”
The beginning of the end for niche retail
At a time when consumers are being more choosy with their money, it’s getting harder for niche retailers to survive. Joann’s sales picked up during the Covid-19 pandemic, when consumers were spending more time than ever at home.
But once society recovered and got back to normal, consumers were more apt to spend their discretionary funds on travel or social events. That swift decline in demand, coupled with fierce competition, made it difficult for Joann to stay afloat.
Related: Formerly bankrupt retailer sells assets, reopens operations
Two of Joann’s largest competitors, Hobby Lobby and Michael’s, have larger store footprints, with more than 1,000 locations each. And with big-box stores like Target and Walmart offering their fair share of crafting supplies, it’s no wonder Joann couldn’t hang on.
The post-pandemic years also saw an uptick in discount store openings, which no doubt hurt Joann’s bottom line. While hard-core crafters may have been drawn to Joann’s vast and higher-quality offerings, fairweather crafters had no problem choosing budget-friendly alternatives.
More bankruptcy:
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This trend, unfortunately, is not limited to Joann. In an age when inflation doesn’t seem to be cooling and consumers have easy access to niche products through big-box giants and Amazon, it’s become increasingly difficult for specialty stores to remain financially viable.
Meanwhile, fans of Joann should be on the lookout for liquidation sales at the 500 stores that are set to close in the near term. Joann is also offering up to 70% off of its inventory online as part of its Presidents Day extravaganza.
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