Joann on Monday announced it has entered into a $100 million first-in last-out facility “that will provide the company additional liquidity, help optimize the balance sheet, and drive free cash flow across the enterprise.”
The sewing and crafts retailer said that on March 10 it had borrowed the full $100 million available under the FILO facility, and that proceeds will help it repay a portion of its existing $500 million asset based revolving loan facility.
Joann, which had landed on Retail Dive’s 2022 bankruptcy watch list in December, reported that it swung to a loss in Q3 and announced a cost-cutting effort predicated in part on falling ocean freight rates.
Joann enjoyed brisk business during the pandemic as many people worked on projects at home. But the company has watched sales fall as pandemic lockdowns have eased, consumers again prioritized more extroverted activities, and as inflation hurt discretionary spending.
That has resulted in a financial squeeze. In Q3 the company’s cash and cash equivalents had declined to $27.5 million from $30.9 million in the year-ago quarter. Meanwhile, long-term debt rose to $1.06 billion from $853.8 million the previous year, as net interest expense rose to $18.1 million from $11.8 million the previous year.
The return to more normal lifestyle patterns has brought more people into stores, and that has worked in Joann’s favor to some extent, however. In December CEO Wade Miquelon noted that an effort to revamp and in some cases relocate stores was bearing fruit.
“On balance, we're very pleased with the results of these locations as we were able to showcase the full breadth of the Joann brand in a way which we could not in our previous smaller footprints,” he said during a call with analysts.
In January, Telsey Advistory Group analysts led by Joseph Feldman noted “robust” customer traffic at a store that had been remodeled in 2021.
“Joann’s sales continue to normalize following a very strong 2020 when consumers spent more time on arts & craft projects during lock downs, and have yet to stabilize,” Feldman said. “Comparisons are beginning to ease further and we currently expect Joann to begin growing again in 1Q23.”
The retailer reports its Q4 results next week.