In a significant development for the retail industry, popular fabric and crafts retailer Joann has filed for Chapter 11 bankruptcy. The Ohio-based company, which has over 800 stores nationwide, made the announcement on Monday as it seeks to navigate through the restructuring process.

Joann cited a combination of factors for its financial struggles, including higher operating costs and waning consumer demand. The company, burdened with a debt between $1 billion and $10 billion, attributed its increased expenses to the rising costs of shipping products from overseas and the impact of higher tariffs imposed by China.

The onset of the COVID-19 pandemic initially provided a boost to Joann, as consumers turned to crafting and DIY projects during the lockdowns. However, sales have plummeted over the past two years, with Joann blaming consumer cutbacks due to inflation and other economic challenges. The easing of pandemic-related policies, reduced demand for fabric and mask-related products, and the termination of stimulus programs by the federal government further impacted Joann's revenues.

Additionally, Joann faced mounting costs from remodeling its stores and a significant increase in ocean freight expenses, resulting in a $150 million spike in inventory costs from fiscal years 2021 to 2023.

Neil Saunders, an analyst from GlobalData, noted that Joann's financial struggles were long anticipated due to its debt burden, lack of profitability, and competition from rival retailers. The company has faced challenges in maintaining store standards and customer service levels, leading to a decline in its customer base. The desire for lower prices has also driven some shoppers to competitors like Hobby Lobby.

As part of its bankruptcy plan, Joann aims to convert back into a private company. The fabric and crafts retailer had previously gone private in 2011 after being acquired by equity firm Leonard Green & Partners. Earlier this year, Joann went public but has now chosen to pursue a different path in light of its financial difficulties.

Amidst these developments, Joann has secured approximately $132 million in new financing, a move that positions the company to continue operating its stores. The funding is expected to reduce Joann's funded debt by about $505 million, offering some relief in its restructuring efforts.

The bankruptcy filing adds Joann to the growing list of major retailers that have succumbed to financial turmoil in recent years, joining the ranks of GNC, J.C. Penney, and Party City. These bankruptcy filings underscore the ongoing challenges faced by brick-and-mortar retailers as consumer spending increasingly shifts towards online platforms like Amazon.com.

With its 18,210 employees, including 16,500 working at store locations and 262 at its distribution center in Hudson, Joann now embarks on a critical period of restructuring and strategic decision-making. The company's efforts to adapt to evolving consumer preferences and address its financial challenges will determine its future success in the competitive retail landscape.