A Case Study in How to Go Broke

Joann Fabrics filed for Chapter 11 bankruptcy protection yesterday. My prediction was off by one business day—I told the husband last week that I thought it would happen on Friday, but Joanns waited until Monday morning.

The best reporting on this has been done by The Sewing Report LIVE channel, on YouTube. Jen has been covering Joanns for many months now and has done a thorough examination of the private equity firm that currently owns and controls the company. I’m not even going to try to explain the mess that this former icon has become, other than to make some general observations. If you want the details, watch some of The Sewing Report LIVE videos.

  • My first observation is that the pandemic handed Joann Fabrics a golden opportunity to ride a wave of renewed interest in sewing and crafting, and they squandered it. Not only were more people taking up sewing (making masks), more of them were also staying home and working on creative projects. Capitalizing on that should have been their prime focus.

  • Mistake number two was not finding a way to offer classes. If you want future customers, you have to create them. Young people aren’t being taught by mothers and grandmothers or in home ec classes anymore. Quilt/fabric/craft stores with full-to-bursting class schedules tend to do really well. We have one here in Kalispell (Quilt Gallery). The Quilting Bee in Spokane is another. Classes get people into the store, introduce them to new projects, and encourage them to buy supplies. Online classes are great, but I am hearing from more and more people that they would prefer to have in-person instruction.

  • Mistake number three was putting people in charge at the corporate level who have zero experience in the crafting sector. I see evidence of this in the way Joanns tried to push customers to buy online. They pushed hard. Sewists, especially, prefer to be able to look at and touch fabric in person, and requiring a minimum two-yard cut of fabric when ordering online is insane! That might work for garments and home dec, but quilters deal in fat quarters and half-yard cuts at most, unless they need a quilt back.

  • Mistake number four was turning every Joanns into a glorified Dollar Store full of cheap Chinese merchandise. Instead of trying to become like Hobby Lobby, they should have been doing everything they could to differentiate themselves from Hobby Lobby.

  • Mistake number five—and probably the most egregious—was the appalling way they treated their employees, cutting former full-time staff to part-time and asking them to take pay cuts to minimum wage. The Sewing Report LIVE noted that Joanns has just given its Chief Financial Officer, Scott Sekella, a $400,000 bonus if he agrees to stay on board for another six months.

I could go on, but that covers the worst of it. The Washington Post article included this quote, which sums it up:

Though Joann is still a force to be reckoned with in the fabrics and textiles space, “it has lost customers to rivals over recent years,” said Neil Saunders, managing director of GlobalData, a business research and analytics firm. “Weakening store standards and declining customer service levels, partly because of staffing cuts, have made stores less desirable.”

I think people are sick and tired of this race to the bottom. Remember my astonishment at shopping at the Walmart in Puyallup that was so clean and organized? If retailers want to stay afloat, they need to provide a positive in-store shopping experience. And that means paying employees well, training excellent store management, and offering products people want to buy.

Joanns has an ambitious plan to exit Chapter 11 within a month and become a privately-owned company. Its stock was delisted from the Nasdaq, having plummeted to $0.18 a share. According to an article at Yahoo Finance, Spinrite Corp is the largest unsecured creditor. Spinrite manufactures Red Heart, Patons, and Bernat yarns, to name a few. Now I know why the yarn racks at most Joanns stores have been empty. Claims of supply chain disruptions may, in reality, have been manufacturers refusing to fill orders because they were worried that they wouldn’t get paid.

We shall see what happens. Hopefully, the corporate management of whatever entity emerges from this restructuring will make a sincere effort to learn from these mistakes and also listen to customers when they provide feedback about what they want. But I’m not holding my breath.

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My gut has been telling me to wait until next week to start planting. We’ve had several beautiful days of sunshine and temps in the low 60s, but the forecast is still predicting a high of 29F on Saturday with snow. I see no reason to plant now, because all we’re going to be doing is using a lot of propane to heat the greenhouse, and the extra few days are not going to give the plants any kind of head start.

I’ve been gardening here for 30 years. I trust my gut.

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We had choir practice after church on Sunday. I’ve discovered a wonderful resource for our church in Amidon Community Music. Peter Amidon is responsible for that stunning arrangement of “Crossing the Bar”—the Laudate Mennonite Ensemble video I posted last week—and he and his wife have created a repertoire of acapella pieces for small choirs that are perfect for us. We have a mix of strong musicians and people who love to sing but have no formal training. Finding music suitable for our choir has been a challenge. Also, I love to sing almost more than I love to play the piano, and not having to be the accompanist allows to me to do that.

On Easter Sunday, we will be singing “The Angel Rolled the Stone Away”—my gift to the basses—and “Joy Shall Come in the Morning.”