storewanderer wrote: ↑January 30th, 2024, 12:25 am
A Michaels-JoAnn merger needs money. I would probably do co-branding of the stores, a literal "combo store." I think they could do very well. Both chains have a lot of good programs and loyal customers who shop both stores anyway. Combining the best of both into a combo would lower overhead, make it easier for customers, make logistics easier, I see little downside to this strategy beyond that it would result in some empty boxes.
If they took the Office Depot-Office Max approach where let's say the buying party was Michaels and they decided to say okay, here we are, we have taken over JoAnn. We have no money to do anything much here. So what we will do is we will just completely kill the JoAnn format (as Office Max was killed) but change nothing cosmetically inside the stores, and we will not change the name, and we will merchandise the store like a Michaels. So now there will be these two stores JoAnn and Michaels that are 1/2 mile apart and people used to visit both and buy different items, now both have the exact same items and customers are upset and only visit one to shop so there is a lot of revenue loss. That would be a failure.
I think back in the 90's or early 00's the two chains could have pulled this merger off better than today. There were some culture similarities in the past but I think with what has happened at Michaels plus the ongoing financial struggles of JoAnn both cultures are damaged in recent years. The way you connect with customers in both chains is similar. You can do classes etc. to engage customers which both chains have done in the past, different themes for the classes at each chain, for instance, but same general idea to inspire the customer into projects that will generate additional sales/engage the customer and fun for employees at the same time. There were also more regional chains left in the 90's or 00's. There were still more of those Ben Franklin chains around, Hancock Fabrics was still in business...
I also wonder how an operator model would work for these chains Michaels and JoAnn. Specifically JoAnn. Similar to how Ace Hardware works. I guess that is what Ben Franklin was... and that is almost gone... so maybe I just answered my own question.
I think an operator model for Joann could work in a unique way. Michaels originated as Ben Franklin and broke away, and seems to be heavily geared towards a Walmart or CVS type operation now.
The problems are different.
Michaels suffered a talent exodus under new ownership of Apollo. They lost many vendors in the transition and appear to have a very disgruntled employee base. They had one store attempt to unionize last year and the reddit folks indicate that the company employed enough union busting behavior to influence a tied vote (meaning the union lost, as they had to get half plus one). The stores have become stale and product quality appears to have seriously declined on house brand items since the transition. Michaels has a very inconsistent fleet of stores in size, format, layout, decor, etc. but somehow has been able to try to breathe a bit of consistency into the chain through planograms and other tactics. Although I've seen some pretty old and dingy Michaels, none are as bad as the everyday average Joann. And they're owned by deep pocket Apollo who could invest if they wanted to.
Joann is seemingly forever short on capital and stuck with a fleet almost entirely comprised of the wrong buildings. Most are small, dingy, Kmart-esque facilities 40+ years old that need to be put out of their misery. Then they also have a cluster of too-large megastores that they can't take care of, those are 60K+ Sq ft which is larger than Hobby Lobby and all need to be closed or split and subleased (which is costly). And then they have 10% or less of their stores that opened under a completely new prototype between 2020 and 2024 which are the right size about 25-35K, right layout, right assortment, basically the perfect store. But they have no credible path to move from 10% to 100% of the stores matching that new prototype.
The only way it works as I see it is a deal to sell the brand, handful of go-forward stores that are all the new format, and intellectual property to Apollo, and then a licensing agreement to a newly created and minimally funded operating company that will take all the old stores and basically run itself into the ground in two years or so. Apollo then takes those IP and assets and combines them into their Michaels organization and funds a remodel campaign to create that consistent "best of both" Michaels branded store "with JoAnn inside," which is basically that new JoAnn prototype with the best of either chains merchandise by department. As customers become used to JoAnn being inside their shiny remodeled Michaels, the standalone JoAnn stores will basically sunset themselves in a bankruptcy. They still net closing most of the JoAnn chain and maybe a handful of Michaels where their facilities might be inferior. It's doable and I think when it's done Apollo would have a valuable entity in the new Michaels-JoAnn company that they could IPO profitably.
