Companies usually file Chapter 11 bankruptcy as a last resort. That’s because once they file, a court has control of the choices they make around the business.
A company can even enter Chapter 11 with a plan to sell itself to its vendors, lenders, or another friendly party. The bankruptcy court can ignore that plan if a better offer comes along.
Related: After bankruptcy, retail chain liquidates stores, seeks buyer
The court has to consider the best interests of everyone involved. One offer might kept the chain open and allow many workers to keep their jobs. But if vendors and lenders prefer a higher cash offer that liquidates the company and pays them more of what they’re owed.
It’s a dangerous and slippery slope where a lot can go wrong, and even being successful in the process does not guarantee future success.
In many cases, bankrupt retailers hire an outside firm to handle their liquidation sales. Those companies can sometimes bring in outside merchandise and leverage the brand name and reputation of the company being liquidated to sell items it otherwise might not have carried.
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Even when the company and its partners follow an ethical road, there are still a lot of dangers facing customers of the brand.
Image source: Getty Images.
Joann shares a warning
Joann, thought of by many as Joann Fabrics, filed for bankruptcy for the second time earlier this year and has begun liquidating its stores.
The chain has a really dedicated fanbase that loves the retailer, and it has issued a warning to its customers via its social media pages.
“Please shop in store only. Joann.com is available to browse our catalog and find your closest store, but there is no online shopping available during our liquidation. Beware of fraudulent websites,” the company shared.
There have been fraudulent sites posing as Joann to steal from its customers.
More closings:
- Popular retail chain to close unprofitable store locations
- Bankrupt retail chain unloads store leases, key asset
- Popular discount retailer files bankruptcy, closes all stores
Many customers thanked the chain for the warning, while one employee begged people attending the liquidation sales to not take out their anger over the prices at the store’s remaining employees.
“Yeah, I work at a Joann’s, and people are appalled by the ‘liquidation’ prices. I just tell them, either you buy it or wait till it gets discounted more and take a chance it won’t be there. That’s all we can do! We can’t do anything about the prices, but you know the new owners want as much as they can get, obviously,” Missy Prime wrote.
Where Joann stands now
Joann has been sold and its new owner is the company liquidating its current inventory.
“Following a comprehensive sale process and auction, GA Group together with the Prepetition Term Loan Agent, has been selected as the winning bidder to acquire substantially all of Joann’s assets. In connection with this agreement, subject to Bankruptcy Court approval of the transaction, the winning bidders plan to begin winding down the company’s operations and conduct going-out-of-business sales at all store locations,” it shared on its website.
GA Group could, in theory, reopen as a website-only business or even pursue a different brick-and-mortar model.
The chain plans to finish its going-out-of-business sales by the end of May.
Joann has already stopped accepting gift cards and no longer accepts returns on any item.
Related: Iconic beer brand closes another beloved craft brewery
The company’s website and app are open for browsing and sharing store locations, but neither takes orders anymore. Joann has also changed some of its discount rules.
“Customers will have the opportunity to purchase our assortment at special prices during the going-out-of-business sales. Personalized discounts and discount partnerships will be paused at this time (e.g. Girl Scouts, Teachers,Military and Healthcare),” it shared on its website.