One of the major, if not only, fabric supply chains in the US, Jo-Ann’s, is closing all eight hundred of its stores. While we may think that the closing of this crafting store is inevitable, with more and more merchandise being sold online, the story of shifting interests wasn’t the demise of this business. In fact, its closure has a common denominator with a lot of closed businesses — private equity firms.
Companies that are controlled by private equity firms are ten times more likely to go bankrupt in comparison to non-PE-owned companies. While filing for bankruptcy isn’t the end of a business, in this round of bankruptcies, it meant the end for Jo-Ann’s, who filed for bankruptcy twice within a one-year period.
Private equity firms aren’t discussed as much in the public, but these few firms have expansive portfolios that determine a company’s fate as well as the employment of countless Americans.
These firms have extremely short-term profit-driven goals. Their use of debt-centered strategies, their extraction of the money from their portfolio companies, and their immunity from financial and legal consequences create a dangerous web for these businesses. These factors set up these businesses for failure. What makes the situation even worse is that the private equity firms have no legal repercussions and are able to repeat and rinse this process again and again.
When Jo-Ann’s was sold over a decade ago in the late 2010s to a private equity firm, it was $45 a share, and the company had no outstanding debt. Fast-forward to the 2020s, and its share price is valued at $12. It had outstanding debt and filed for bankruptcy with around a billion dollars of debt. The billion-dollar debt is from the private equity sale of Jo-Ann’s back in 2011, which was around a 1.6 billion dollar purchase. The debt that Jo-Ann’s had required wasn’t from bad policy or a slump in sales; it was from the private equity firm’s purchase of the company. The equity firm saddled the company, not the firm, with the debt to buy the company.
Many economists call this sort of practice a financial looting or plundering, which since 2013 has accounted for 600,000 job losses. With this closure of the fabric and craft store, some 19,000 jobs will be lost. In the year 2024 alone, private equity firms have accounted for sixty-five percent of these large-scale billion-dollar bankruptcies.
For those wanting to buy fabric, the options are slim. There are very few, if not any, other brick-and-mortar fabric stores to actually go to. While there are several online fabric retail businesses, there’s little option for those who want to see, touch, and compare the fabric in person. A lot of online retailers have gotten smarter about communicating the scale and texture of fabrics in recent years, making it easier for buyers to understand the type of fabric it is before purchasing. Many are saying that this is opening a market to more localized fabric businesses, which were hurt in the late 90s and early 2000s with the expansion of Jo-Ann’s into rural communities. Where this closure will take the future market of textiles is still hard to say.