Crafts retailer Joann (NASDAQ:JOAN) filed for bankruptcy, but JOAN stock is up on the news.
It’s a Chapter 11 filing, which means the company’s 800 stores can remain open. It comes with $132 million in fresh funding that will reduce debt by half.
JOAN stock was due to open this morning at about 25 cents per share, a market capitalization of $12 million, after 2023 sales of $2.16 billion.
Can This Chain Be Saved?
Joann suffered a horrible two years as consumers retreated from pandemic-fed hobbies, losing $230 million in fiscal 2023. The company had returned to public markets just in 2021. This was a decade after private equity firm Leonard Green & Partners paid $1.6 billion for it. The 2021 initial public offering (IPO) raised $131 million, and JOAN stock has lost 98% of its value since.
At the time of the IPO, analysts were quick to predict big things for the retailer, including a $17 per share price target. But sales contracted after the pandemic, and losses of $440 million followed over fiscal 2023-2024.
A smaller chain with less debt may become viable, but costs will have to be substantially reduced. A week before the filing, the company gave Chief Financial Officer Scott Sekella a $400,000 retention bonus. Since joining Joann in 2022, Sekella has identified $200 million in potential cost savings and done a sale-and-leaseback of its headquarters in Hudson, Ohio.
Joann also named Pamela Corrie of Burford Capital to its board on March 13. Corrie spent decades as a general counsel for bankruptcy and restructuring with a unit of General Electric (NYSE:GE). She has since been an independent director at retailers Bed Bath & Beyond, Pier One, and Lord & Taylor when they were facing financial trouble.
JOAN Stock: What Happens Next?
Joann is not going out of business yet. This may explain JOAN stock’s gain. Investors may also be speculating on how Leonard Green gets its money out of the company. The stock was trading as nearly worthless before the filing.
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On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
