Fabric and craft retailer Joann to go out of business, close all of its stores
apnews.com
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I remember when this happened to RadioShack. I went from being able to purchase just the resistor I needed to a $15 pack of 1,000 resistors I'll never use.
I'm not religious, but if Pope Francis survives, then perhaps we can convince him to add profligacy to the list of deadly sins.
Unfortunately not all of us live in dense urban centers that can support boutique craft stores.
Update: I told her this news and she basically said that every time she was in there, it was a ghost town. I guess we're the outliers ¯\(ツ)/¯
But just in general, this suggests to me more of a sign of the public increasingly turning toward passive or, if you will, packaged entertainment. Does anyone still build plastic models, fly RC airplanes, get together for card games, or bowl?
Maybe though someone in my neighborhood will start up a doom-scrolling league that the wife and I can join. And there's always the watercooler where we can suggest to others that they watch some streaming shows we saw that they've never heard of.
Twice a week I play board/tabletop card games with two seperate groups in two seprate states. Currently surrounded by kit cars I bought from/with a group of colleagues.
"do kids still bowl", I can't help you much there. Kids are currently socialising both online and in person in ways you and I can't even conceputailize.
TLDR it's not all doom and gloom, HN comments isn't the best for this.
Board games are more popular than ever before. I would guess a lot of RC airplane use has been replaced with drones.
Model building, that I'm not so sure about. Or engineering toys in general. Lego is bigger than it ever was before, but that's not quite the same thing. Not sure if it's sucking all of the air out of the market. Miniature dollhouse kits are getting more popular, thanks to Chinese manufacturers like Rolife and Cutebee. But beyond that, it's something I wonder about a lot, and I don't know how to answer that.
But I think part of the reality is that most customers, even sewing customers, don't stop and consider the "feel" of fabric. If you look at what the median sewing machine user is doing, it's probably cranking out a tacky quilt made from cheap polyester fabrics. (Certainly seems to be a favorite activity in my extended family).
And honestly, for all the floorspace dedicated to sewing and crafting materials, I wouldn't be surprised if the bulk of their sales these days was coming from decorations and art supplies for kids.
The last time I bought resistors from Radio Shack, which was well over a decade ago, they were $1 a piece. A piece! While I get your sentiment, you can buy resistors in packs of 100 for roughly the same price you used to get 5 for.
My wife was bummed when I told her about it, but I also recall going several times where they were stocked out of many items, so I kind of get it. Hard to justify a 30/60 minute trip if there is a good chance you wind up empty handeded
Going on a rampage against in-store inventory is a classic PE retail move.
In-store inventory is expensive, subject to shrinkage, etc. So by the spreadsheet, less inventory looks good. But of course, if it's not in-stock when your customer shows up, that's a wasted trip. Only has to happen a few times before your customers quit showing up altogether.
When the majority of bigger ticket purchases moved online, the revenue dried up
What's your idea of a solution? If you need the resistor, and there's no service/parts shop, what do you do?
I think the answer of "Pay more for the part in bulk via an online vendor" is ideal. BEcause that online vendor can also send soap, car parts, clothes, and books at the same time.
I find that professional websites like McMaster, Grainger, and Digikey do everything I've wanted amazon to do for years. They have excellent search, organized part catalogs, spec sheets, CAD, and no counterfeits.
I checked and Digikey sells most individual resistors singles for $0.10ea, and $0.004ea for 5,000 ($20).
One of the big takeaways people need to understand is that inventory costs are eating these businesses alive. To keep a hundred different types of fabric available in hundreds of different stores to sell by the inch is expensive, as is the floor space to do it. On a cost basis you are never going to compete with an online store with one inventory, or a warehouse stores that move products in quantity and don't maintain inventory.
But saddling a retail company with tons of debt makes much, much harder; profits that should be going to restock instead go toward financing the debt.
We don't really need to read tea leaves here to figure out the cause of death.
And again, the businesses that compete with the internet right now are doing it by keeping their inventory costs in check. They have either moved most of their "selection" to online-only, or they have done away with consistent inventory across stores.
>> Sales fell 4.1% to $539.8 million. Same-store sales also dropped 4.1%, including a jump of 11.5% for e-commerce sales.
Had they cut underperforming stores and reduced headcount, they could have survived.
I know first hand how awful it is to lay people off due to your own mistakes, but I also remember my investors advising me to get to sustainable in one round.
They could have downsized their way out of it, they just really wanted to say they didn't let anyone go. I live ten miles from their HQ and know people who work for corporate finance for them. I was at the party they threw when they re-emerged from bankruptcy last year. It would have been survivable with deeper cuts though, even then, getting back to thriving would have been more difficult and required substantial changes and nobody seemed to have much of a plan for it.
It's not a business model that can justify a cross national big-box store chain, but it can absolutely support local businesses who can better manage margins.
And this was a major reason why Joann's (and similar big boxes like Toys-r-Us or Borders) couldn't compete.
I also noticed that lots of online stores have minimum order quantities.
Guessing too prices for fabric, etc. will be higher.
We all know what will happen, as has happened over and over. Amazon or walmart distribution or fleet service location, OR cleared to make way for a hastily/shoddily put up "luxury apartment complex" made of plastic and plastic+.
Every time I go into a Joanne's it's more and more like a junk hobby shop, and not a nice one. Aisles are dimly lit, you can't see the merchandise, fabrics are stashed in disorderly piles, marked down things at the front; the people who work there aren't sewists and so can't really answer when to use this thing instead of that thing for a particular application. It's never a nice shopping experience. I would rather they had a third of the inventory, but better quality, and the option of buying stuff to get it delivered there.
I'm sad that we're no longer a maker society, there's so much skills and craft that are being lost, perhaps irrevocably. Seems like anytime I go in search for how to do a thing, the first thing I find is something to buy.
If you remember the early days of Covid when there were mask shortages, people REALLY needed access to fabric and supplies, etc.
Also, arts and crafts were pretty essential to our sanity when staying home with kids during Covid.
The entire original "retailpocalypse" was an orgy of PE in retail. If you wanted to know which retailers were going to survive all you had to do is look at the ownership.
It's no more an obsolete business model than something like a Bass Pro Shop. It's just a different hobby.
The textiles industry is almost entirely outsourced, and the margins of being a middleman like Joann's doesn't work when imports are growing expensive AND online stores can sell similar products at a lower price, and your prices are roughly comparable to the local mom-and-pop.
Furthermore, assuming it's PE that causes companies to fail is a reversal of cause and effect. You sell to PE when your company or organization's "gas" is largely spent, and there is no foreseeable growth, so you cannot raise money traditionally.
For every Joann (stripped for parts by PE) you can also point to a Sailpoint (taken private by a PE and now one of the first IPOs in 2025)
And this is why companies get sold to PE - traditional investors are investing to make money. If an asset isn't making money (eg. Joann's), you invest elsewhere (eg. Alphabet).
And if you're on HN, you probably have a 401K or IRA and are also enabling this, so cut the "holier than thou" BS.
If revenue remains flat or grows at a lower rate than COGS, then you need an influx of capital to manage this.
But this is a bum deal in a lot of cases.
So does the locally owned yarn store, which does it without being in your 401k.
2. Leasing storefronts - Retail Chains and Big Box brands tend to try to take ownership of the property the store is located on, because at their scale it can have potential savings benefits in the medium-to-long term
3. Family as employees - this reduces the impact of salaries, because profit, customer experience, and employee performance are all directly aligned with each other
4. Relationship-based Sales - your local business will maintain relationships with other local businesses, and be flexible with their own needs as well. That boutique's payment is delayed? No big deal, we'll sell you fabric on credit and you can pay us back when you are able to.
5. Smaller scale - you don't need a $100m influx of capital if you are a single or couple local stores. Mo money, mo problems (and a major reason why several unicorns have stayed private over an extended period even before the IPO window shut)
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There are plenty of difficulties when managing a small business as well, but they are different from those that a Joann's might face.
It absolutely is! It's called being "Free Cash Flow" (FCF) Positive - ie a business generates more cash from operations compared to capital expenditures.
Sadly, not all businesses can become FCF Positive - especially if they are heavily leveraged, have significant liabilities, or don't care for optimizing for FCF at the expense of expanding market share or growth.
FCF Positive has become the primary indicator for business health over the past 2-3 years, whereas before the primary metric was market share growth, but it is very difficult to retool or drastically change a business.
More fundamentally, a company like Joann's is dealing with a relatively crowded market (Michaels, Hobby Lobby, resurgence of boutique craft shops), and something has to let go.
If stock price is too low, than the company is worth more dead than alive.
Companies need returns to justify their continued existence to owners.
Growth comes into the picture because if someone thinks growth is possible, they are willing to pay more for it then an owner thinks it's worth.
This is an extremely common PE situation, where a management firm and Banks think more profit could be generated then the current owner. Then they offer more money than the owner thinks it's worth and try their luck. Sometimes it works out, and sometimes it doesn't.
The other common case is when PE act a buyer of last resort. If someone doesn't want to run a business anymore, they look for a buyer.
https://www.cleveland.com/pdextra/2010/12/the_history_of_jo-...
notcancer stated:
>Call me old-fashioned, but maybe craft stores don't need infinite double-digit growth.
Craft stores don't need double digit growth (returns is more accurate than growth), but Joann did because Joann's owners decided they wanted to try to expand their business, and probably their own wealth, and so they tapped the public equity markets.
People seem to be upset that business owners desire to bet for bigger returns, but isn't that the business owners' right? A lot of times, it doesn't work out, or it eventually doesn't work out. But what is the alternative?
I don't agree, but that seems like the clear alternative.
Some people might propose preventing debt backed private equity firms from defrauding investors, but those laws are already on the books. The banks that fund buyouts and sometimes get left holding the bag absolutely know the risks and have well funded legal teams capable of protecting them.
Consumers don't get a say because they are not actual equity owners things like securing access to yarn or all you can eat shrimp do not supersede property rights in the view of the government.
Until they either collapse (LGFVs in China) or severely degrade in user quality (Air India), and it's the taxpayers on the hook.
> heavy restrictions on the ability of owners to sell, dissolve, for take risks with business they own
Then there's no incentive to start or scale a business, for example why business incorporation in Switzerland is preferred over France despite similar/same culture, but easier ability to incorporate, sell, or shut down businesses
> Consumers don't get a say because they are not actual equity owners things like securing access to yarn or all you can eat shrimp do not supersede property rights in the view of the government
I can still go to Michael's, Hobby Lobby, or my local crafts shop to buy the same products.
basing a system on the idea that consumers shouldn't have to shop or businesses can never fail leads to all sorts perverse outcomes.
Woah, that's not nice.
The person you replied to mentioned double digit growth and they're right. Not everything has to have hyper growth. If, as an investor, you want hyper growth, there are entities that can give you that. But even _some_ growth still means your 401(k) is growing and that 401(k) is supposed to grow for you for decades, compounding, not return you 50% next year so you can buy a new jetski.
Why should I invest in my own business if I am not going to get at least what SP500 does? Other than buying myself a job.
For what it's worth, I do have a 401(k), I AM holier than thee, and I don't think we should cannibalize every last business on earth and sell its organs in an alley in the name of economic growth. But those decisions are above my pay grade.
Lower returns means higher tax liabilities.
Joann's won the industry consolidation phase in the 80s-90s, but took on a lot of debt to buy out House of Fabrics, So-Fro and others. They had almost completely retired that debt by the mid 2000s and would be sitting pretty today, but sold out to private equity in 2010. The PE did the usual LBO shit of borrowing a the purchase money and then transferring the debt to the company. Boom, one billion in the hole, buyers strip anything of value, no coming back from that.
I'll miss them because touching fabric is important. fabric ain't like resistors, one 100ohm feels pretty much like the next, and Joanns covered quilters, apparel sewers and upholstery/decor sewers pretty well.
Michael's is owned by Apollo Group.
Hobby Lobby is family owned, but unlike Joann's and Michael's they wouldn't take long term leases or purchase the stores themselves, and concentrate on higher margin furniture.
> The PE did the usual LBO shit of borrowing a the purchase money and then transferring the debt to the company
Yep, but who else was interested in investing in Joann's in the 2010s? There were way better asset classes like Pharma, Finance, and Tech that you could invest in and get better returns.
LBOs are basically investors of last resort - this is where zombie companies (which Joann's absolutely was) go to die.
> I'll miss them because touching fabric is important
And we're lucky that local hobbyist shops still exist along with local fabrics shops. They can provide a better customer experience than a big box like Joann's, Michael's, or Hobby Lobby with decent margins.
This is begging the question. At no point did Joann's require investment.
Inventory, salaries, rent, mortgages on stores, ERP, expansion, etc all cost money.
Yet if revenue remains flat or grows at a rate that is lower than the above inputs, you absolutely need capital.
So maybe when you stop being customer centric and become corporate profit centric you end up losing customers first and profits later.
PE firms in these cases are just the bottom feeders that processes these corporate carcasses, not the cause of their deaths.
It’s different when PE firms go after resources that people need, like health care or elderly care. Here they are acting as sociopaths. They know people will pay as much as they have to, as the other options are death and suffering. Despicable.
You can be customer centric AND profit centric. The issue is when "customer centric" doesn't align with "profit".
Big box and chain retailers often try to own the property the store is located on, so they would essentially become a property speculation play.
Add to that the cost of managing inventory, which means you want to reduce the amount of SKUs offered in order to reduce management overhead, but as a customer that feels like an adverse customer experience. Yet unlike a local business, that chain retailer cannot optimize on customer service because of those thin margins needed to service real estate.
Why is that? I still see stores for board games and the likelihood of making a profit from a board game is abysmal. Blick Art seems to be doing well enough. Even Barnes and Nobles had a turnaround.
I just went to a JoAnn’s a few months ago. If you told me that they were getting a PE makeover I wouldn’t have known.
I mean big box retailers.
A major aspect for big box retailers is real estate. Joann's, Michaels, Toys-R-Us, etc would often take either long term leases or outright own the property of the store itself.
A smaller/local business targeting hobbyists can concentrate primarily on customer experience and inventory, because they generally do not try to enter the asset speculation game as well.
More's the pity then.
I think the hobbyist model will continue to work and thrive if you are a local/regional business
Wouldn't the chinese dropshippers be hit with Tariffs