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It’s not quite a nightmare before Christmas for fabric-and-crafts retailer JOANN. The company is still losing money, and lots of it, as it has for the past seven quarters in a row. On an earnings call Monday (Dec. 4), executives revealed that it lost $21.6 million on $540 million in revenue in its latest quarter, both figures worse than during the same period last year.
But as part of an effort to turn things around, the company told investors in August that it had begun selling Halloween decorations and crafts about a month early. And customers responded by buying more Halloween stuff earlier—including a $500, eight-foot-tall skeleton—and using fewer discounts than usual to do so.
“Halloween is a season where few in retail can offer a more complete solution,” co-interim CEO Chris DiTullio said at the time.
With spooky season wrapped up, JOANN said that Halloween merch saw double-digit sales growth with better margins. Other signs of life the company is now pointing to include lower inventory costs, reduced shipping expenses, and stronger e-commerce sales.
“As a result of our strategic pullback of non-Halloween seasonal inventory receipts, we saw exceptionally high sell-through rates with meaningfully improved profitability over the prior year,” DiTullio said on the earnings call.
Scary times for JOANN
Before the pandemic, JOANN had been struggling with debt after being taken private in 2011. During the quarantine era, though, many people turned to crafts as a way to fill days spent social distancing. To the chagrin of covid-fearful employees and state governments alike, JOANN’s free homemade mask kits drew floods of customers to its more than 800 stores. So many, in fact, that the company was able to go public in 2021.
But things have been rough for JOANN since Americans began emerging from their homes after the lockdowns and restrictions of the pandemic’s early stages. When quarantine crafters stopped coming in to stock up on supplies, all the long-term obstacles to brick-and-mortar retailers—declining foot traffic, competition from e-commerce—returned to chip away at JOANN’s bottom line. Plus, inflation and increased supply chain costs made it harder to turn a profit.
This May, CEO Wade Miquelon resigned after four years at the helm. (Technically, chief customer officer DiTullio and CFO Scott Sekella “co-lead” the “Interim Office of the CEO.”) In September, the company announced it was laying off its vice president and controller in addition to what it confirmed to Crain’s Business Cleveland was an unspecified number of employees at its Hudson, Ohio headquarters. The moves were meant to help JOANN find $200 million in annual savings, a figure it increased to $225 million in the most recent quarter.
In October, Nasdaq gave the retailer notice that its stock would be delisted by April if it couldn’t get its share price above $1, a level it hasn’t hit since June. A gloomy report that month from the analytics firm CreditRiskMonitor has prompted talk that JOANN could be at risk for bankruptcy.
Analysts on the JOANN earnings call were intrigued by the company’s cost-saving efforts, signaling that it may have given itself a bit more breathing room. But investors aren’t convinced that things have hit rock bottom. Shares fell 37% in Tuesday trading, to 56 cents apiece.
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