Sometimes a Bankruptcy Is Just a Bankruptcy

Wandering through my local JoAnn on the first day of liquidation a couple weeks ago, I had thoughts. And feelings. This was the storefront I grew up in, starting in the 1980s as a wee child following my mom around New York Fabrics while she gathered supplies for her next project.^[i] JoAnn, which bought New York Fabrics and other regional chains on a march to national dominance in the 1990s, was by now a shadow of its former self, downgraded in selection and quality. We all knew its death was coming, yet still, it seemed like it should mean something. With some grand economic implications, something I could write to you fine folks about. But the more I thought about it, the more I realized: There is no there, there, as Gertrude Stein may have put it. What happened at JoAnn—or what happened with any other recent retail bankruptcies—doesn’t represent the broader economy or stock market.

When retailers go bust, you often get big narratives about the collapse of brick-and-mortar stores, changing consumer preferences, inflation biting, households cutting back, times being tough, this, that, the other. All these narratives surrounded JoAnn’s latest bankruptcy (its second in 12 months—I covered the first here), which started in January, and its liquidation. Inflation raising the business’s costs and killing the cash flow it needed to service mounting debt? Check. High interest rates making debt impossible to refinance? Check. The Trump administration’s first-term tariffs affecting its supply chain? Check. Post-pandemic supply chain issues messing with inventories? Check. Consumers cutting back as prices rose? Check.

This is broadly kind of true … and kind of not true. JoAnn had high debt, rejiggered its supply chain due to tariffs and says it had vendor and stocking problems. Its sales boomed with lockdown-era crafting, then slipped back from that high base to something more normal. And yet, even this last year, JoAnn was always bustling. All four stores in my general radius always had lines a mile long at the cash wrap and cutting counter. Small sample size and not representative nationally, but it isn’t like the San Francisco Bay Area is free of economic struggles. A lot of Tech folks are out of work. People on the lower rungs of the local income spectrum feel all the same insecurity folks in lower-cost states and towns feel. Yet the fabric and yarn side of the business enjoyed bursting customer demand—a trend backed up at the handful of local, independently owned fabric stores I frequent. As the quality of ready-to-wear clothing slips and fast fashion gains primacy, people are increasingly taking matters into their own hands at their home sewing machine.

So what happened? There is the company’s version, which you can see in press releases. There is the customers’ version, which amounts to they never had anything in stock, the fabric isn’t what it used to be, the stores are disorganized. And then there is the employees’ version, gleaned from social media, which sums to they never scheduled enough hours for us to unload the pallets and pallets of merchandise in the back room, it was impossible to keep the store organized with only two people on duty at a time, they didn’t listen to us or our customers about what did and didn’t sell, they shouldn’t have devoted so much shelf space to lousy home décor no one wanted. What does it all have in common? In my opinion, the whiff of a store that wasn’t well-run.

That isn’t a national trend thing. It is a company-specific thing. Most companies have an arc. Birth, life, death. The death usually happens gradually, then all at once. The last local K-Mart was here seemingly forever, with tumbleweeds bouncing through it, until it wasn’t. Sometimes the demise comes because a new player competed and won. (RIP, local bookstores in the late 1990s and early 2000s.). Sometimes because things the store sold became obsolete and the store didn’t catch up. (RIP, RadioShack and Tower Records.) Sometimes because a nasty recession metastasized longer-running problems. (RIP, Borders.) And sometimes because management just wasn’t up to the task, ruled by spreadsheet, didn’t take feedback, didn’t bother understanding the market, couldn’t adjust, made bad decisions, what have you. (RIP, <<Insert Your Choice Here>>.)

Was JoAnn the latter? I have my opinion. Employees have their opinions. Customers have their opinions. But here are some facts: Sewing supplies are a steady $1 billion-ish market, based on monthly seasonally adjusted annual rates.^[ii] Growth in this consumer spending segment is about flattish over the last several years once you adjust for inflation, which means demand kept up with fast-rising prices. So whatever happened with JoAnn, I don’t think it is a story about falling or changing consumer demand broadly. Not when demand was overall fine. And especially not when sewing supplies represent 0.2% of total US goods spending and 0.007% of total consumer spending.^[iii] It is about one national chain operating in a niche space.

And most importantly, it isn’t about the stock market. Fun fact: There are no publicly traded pureplay craft stores. There are large, publicly traded multiline retailers with teensy fabric or craft aisles. Otherwise, there are family-owned local shops. There is a huge family-owned national chain. There is a national chain under private equity ownership and showing many of the symptoms JoAnn displayed in its final years. And there was JoAnn, which waffled between the stock market and private equity but delisted a year ago.

As my column last year attempted to hammer home: The stock market isn’t the economy. Repeat it. The stock market isn’t the economy. The stock market isn’t the economy. Make it your mantra. Take down your “Live, Laugh, Love” sampler and replace it with, “The stock market isn’t the economy.”

And then: Consumer Discretionary stocks aren’t US retail. Consumer Discretionary stocks aren’t US retail. Consumer Discretionary stocks aren’t US retail. (Ok, I guess Live, Laugh, Love rolls off the tongue more easily.)

The stock market is about publicly traded companies. Its Consumer Discretionary and Consumer Staples sectors consist of publicly traded consumer brands—the products you buy—and publicly traded places where you buy those things. The actual retail universe in our country is sooooooooooooooooooooooo much bigger and broader. When you walk through your town’s shopping district and see local businesses humming, that may reflect broader trends in the publicly traded world. Or it may not. These larger, national companies may have costs and logistical complexities to navigate that affect earnings in ways that aren’t immediately apparent or relevant to your neighbor’s dress shop. Or, your neighbor’s shop may battle high wholesale prices and rental costs the large publicly traded companies can mitigate through economies of scale. I could probably illustrate this better with a Venn Diagram, but you get the point.

So JoAnn matters … to me, to customers, to employees, to vendors, to everyone with a financial stake or sentimental attachment. It matters to the small businesses that relied on JoAnn for supplies. It matters to the companies that depended on JoAnn as an outlet and are now collateral damage. But to the broader economy? To the stock market? To anyone trying to glean insight into Consumer Discretionary stocks? Consumer spending? The economic outlook? Stocks in 2025? There, JoAnn doesn’t matter. Sorry. Its demise is a backward-looking reflection of all the business decisions that came before. Not a statement about things broadly, today, or what awaits.