Re: JoAnn-"restructuring"
Posted: March 18th, 2024, 8:44 pm
Let's face it though, how many companies, especially retail companies, survive Chapter 11 long-term?
Let's face it though, how many companies, especially retail companies, survive Chapter 11 long-term?
There is a certain "sharpshooter fallacy" in post-Chapter 11 bankruptcies and eventual failure. The problem is post-Chapter 11 goes two ways:
They have a lot of stores that seem to need to be closed. I refuse to believe that the entire chain is cash flow positive and productive and their only problem was debt. They have closed very few stores so far this year, single digits. Only one closed in SoCal and it was really a very expensive relocation from a tiny box in Laguna Hills to a fancy former Ralphs Fresh Fare.storewanderer wrote: ↑March 18th, 2024, 10:23 pm Is it possible they've already closed the stores they want to close and they can quickly just cancel the leases this week and move on?
Otherwise I cannot imagine a retailer not closing stores to get out of unproductive stores during Chapter 11.
Zero. And if they're going to be doing an expedited exit of chapter 11 where they're out in April then they needed to start liquidating any closing store the day they filed so that they would be done before end of bankruptcy.
I think they are so fragile that if they had any waves of store closures it would not have stopped. Customers would have waited for their store to close, and with the crashing sales it would eventually become a self fulfilling prophecy.storewanderer wrote: ↑April 26th, 2024, 12:36 am JoAnn exited bankruptcy.
https://www.reuters.com/business/retail ... 024-04-25/
"Joann creditors, who agreed to cancel about half of the company's debt and take ownership of the company's post-bankruptcy equity, unanimously voted for the restructuring."
ZERO store closures (not sure I agree with that, but good for them and their people to keep the store base stable).
This does give them more cash to work with by cutting their debt service costs though. I don't care about the shareholders being wiped out either even though I've been a wiped out shareholder more than once, it is just how it goes sometimes.ClownLoach wrote: ↑April 26th, 2024, 9:18 amI think they are so fragile that if they had any waves of store closures it would not have stopped. Customers would have waited for their store to close, and with the crashing sales it would eventually become a self fulfilling prophecy.storewanderer wrote: ↑April 26th, 2024, 12:36 am JoAnn exited bankruptcy.
https://www.reuters.com/business/retail ... 024-04-25/
"Joann creditors, who agreed to cancel about half of the company's debt and take ownership of the company's post-bankruptcy equity, unanimously voted for the restructuring."
ZERO store closures (not sure I agree with that, but good for them and their people to keep the store base stable).
So I guess the good thing is they survived bankruptcy and exited in a better financial situation. I have no qualms about the shareholders being wiped out, but I hope that they didn't have stock incentives for employees and management that were destroyed in this process as that would leave them very jaded and demotivated.
The bad news is they still don't have any money to fix their dumpy stores, consolidate the losers into one relocated winner store as they have been doing painfully slowly in SoCal (Fullerton, San Marcos, Laguna Niguel, and elsewhere). They are going to need the new creditor ownership to sell them to someone who is interested in actually growing the company and not an Apollo type that will just heap piles of debt onto the balance sheet until they're smothered to death. But who would be interested in taking on such a difficult cause and spending the money, considering that it is a very long return on their investment?
Good for Joann, they won the battle. Now they need to figure out how they could go win the next one before they still lose the war.
I just don't see where they can reinvest in the business. They cut debts but I'm sure the interest rates on their remaining debt are going to be higher. So even if debt was cut in half or so, the debt service would be a lesser reduction. The improvement in cash flow would be minimal under significantly higher rates. And they still need to immediately run a huge PR campaign with tons of ads because social media commentary reflects the typical ignorance of the public, they don't understand that the chain is not closing down and it's likely they've lost a lot of business already they need to get back. I also am unsure if they had problem business categories that they are going to remove, maybe cut back on the art supplies and frames since they are weak compared to Michaels and Hobby Lobby. Their business plan should be run the best fabric and fabric crafts store possible, period. Sell fabric, yarn, and related accessories. Don't try to be Michaels or Hobby Lobby because they're always going to be inferior to them in their core businesses.storewanderer wrote: ↑April 27th, 2024, 12:44 amThis does give them more cash to work with by cutting their debt service costs though. I don't care about the shareholders being wiped out either even though I've been a wiped out shareholder more than once, it is just how it goes sometimes.ClownLoach wrote: ↑April 26th, 2024, 9:18 amI think they are so fragile that if they had any waves of store closures it would not have stopped. Customers would have waited for their store to close, and with the crashing sales it would eventually become a self fulfilling prophecy.storewanderer wrote: ↑April 26th, 2024, 12:36 am JoAnn exited bankruptcy.
https://www.reuters.com/business/retail ... 024-04-25/
"Joann creditors, who agreed to cancel about half of the company's debt and take ownership of the company's post-bankruptcy equity, unanimously voted for the restructuring."
ZERO store closures (not sure I agree with that, but good for them and their people to keep the store base stable).
So I guess the good thing is they survived bankruptcy and exited in a better financial situation. I have no qualms about the shareholders being wiped out, but I hope that they didn't have stock incentives for employees and management that were destroyed in this process as that would leave them very jaded and demotivated.
The bad news is they still don't have any money to fix their dumpy stores, consolidate the losers into one relocated winner store as they have been doing painfully slowly in SoCal (Fullerton, San Marcos, Laguna Niguel, and elsewhere). They are going to need the new creditor ownership to sell them to someone who is interested in actually growing the company and not an Apollo type that will just heap piles of debt onto the balance sheet until they're smothered to death. But who would be interested in taking on such a difficult cause and spending the money, considering that it is a very long return on their investment?
Good for Joann, they won the battle. Now they need to figure out how they could go win the next one before they still lose the war.
If they go for a private equity type that just throws them more piles of debt that will just put them right back where they were before the bankruptcy... so I hope that doesn't happen... typical private equity if it does...