Dive Brief:
- Citing Joann’s downfall and U.S. tariffs, Design Group Americas filed for Chapter 11 protection Thursday and will wind down. Parent IG Design Group sold the business in May to Hilco Capital Group for $1, and IG’s non-U.S. affiliates are not part of the bankruptcy.
- The company, whose portfolio includes sewing pattern names like McCall’s, Simplicity, Vogue and Butterick, as well as party supply, crafting and home decor brands, said it has an agreement for about $53 million in debtor-in-possession financing from a Hilco affiliate.
- Design Group Americas will put many of its brands up for sale while “winding down its domestically manufactured woven ribbon products business and supporting assets,” per the company’s press release.
Dive Insight:
For a lot of people who picked up sewing or crafting during the pandemic, their project is barely noticeable in the rear-view mirror — a major reason that Joann itself failed to revive its fortunes following its March 2024 bankruptcy. In January, Joann filed under Chapter 11 for the second time in less than a year, this time in order to go out of business.
Last month rival craft store Michaels snapped up Joann’s IP and has boosted its fabric arts assortment. But Joann’s disappearance is nevertheless having consequences downstream: in court documents, DGA cites “macroeconomic challenges, coupled with specific setbacks such as the bankruptcy and liquidation of one of the Debtors’ major customers, Jo-Ann Stores, LLC,” as having “severely impacted [its] sales performance and revenue.”
Trade tariffs imposed this year also “increased operational costs, affected pricing strategies, and contributed to reduced customer orders,” the company said.
Before its sale to Hilco, DGA was the IG Design Group’s U.S. operation, with some supporting operations also based in India, Hong Kong, China, the U.K., Mexico and Australia. For the financial year ended March 31, 2024, DGA reported audited revenue of $500.3 million and an operating profit before tax of $4.9 million. As of Sept. 30, 2024, DGA had un-audited net assets of $245.4 million, including intangibles and deferred tax assets of $94 million.
At the time of the sale, IG Design Group Chair Stewart Gilliland said the company had “worked tirelessly over a number of years to rebuild DG Americas into a more profitable and sustainable part of the Group” but that “numerous external factors,” including shrinking demand for the category, impeded its progress.
“Compounding this, in light of recent events in North America and the evolving tariff situation, it has become clear that the headwinds facing the division are untenable,” he also said, adding that offloading the U.S. business was necessary to protect the overall company.
Last week, DGA said it had $8.2 million or so of accessible cash-on-hand, which wasn’t enough by itself to support its sale and wind-down. The company’s portfolio boasts more than 50 product categories and brands, including some over a century old.
