Is Joann’s IPO success all sewn up thanks to the pandemic?

Discussion
Photo: Facebook/@JoAnn
Feb 18, 2021
Matthew Stern

Jo-Ann Stores went private in 2011 and by 2018 the chain was floundering in the hands of a private equity firm. When the novel coronavirus pandemic hit, however, the crafting retailer, which has been operating under a mountain of debt, experienced an unexpected boom and the retailer (that now goes by Joann) was suddenly doing solid business again. Coming off of a strong 2020, the chain is now pursuing an initial public offering.

Leonard Green & Partners, the private equity firm that owns the retailer, filed a prospectus for the chain’s IPO on Tuesday, Fortune reported. The chain experienced a 24.3 percent increase in sales during the nine months ending October 31, 2020.

Other crafting-related companies have enjoyed similar pandemic-driven prosperity. Publicly-traded DIY craft marketplace Etsy, for instance, experienced a massive influx of business and a huge stock spike, CNBC reported in June. After initial fears that small crafters and the marketplace that catered to them would be swept away amid the nearly unprecedented economic uncertainty, the nationwide need for cloth facemasks turned Etsy into a customer destination.

“Fundamentally there has been a shift for people who want to do more do-it-yourself projects,” Wade Miquelon, Joann’s CEO, told Fortune. He added that the people selling their crafts on marketplaces like Etsy have also benefited Joann as it is a source of supply.

At least some of the success that Joann has had can be attributed to changes the retailer made prior to the pandemic to improve its store experience and services. These were in the works even before Moody’s put the chain on a default watchlist in 2019.

Joan launched an experiential store concept in 2018 meant to bring in customers for longer trips and promote collaboration. The prototype store featured an in-store coffee shop, a “Creator’s Studio” section for classes and events, rentable crafting tools, expert personal shoppers and tech enhancements.

Joann is not the only retailer to pursue a high-profile IPO during the pandemic.

In June of 2020, Albertsons finally went public after years of announcements and false starts. At the time of this story’s writing the share price sits at around $16.32, slightly up from the $16 per share price at the time of the IPO.

DISCUSSION QUESTIONS: Have the upgrades that Joann made in recent years set the company up for success as a publicly-traded company? What do you see as the benefits and drawbacks for Jo-Ann going forward?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"While I think the pandemic has helped with sales, I don’t know how long people are going to keep crafting once life gets back to normal."
"...as a public company, they will be under pressure every quarter to deliver better results. This is a significant distraction to running the business."
"Forgive my cynicism, but this is the opportunity all PE firms look forward to. IPO and get your money."

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5 Comments on "Is Joann’s IPO success all sewn up thanks to the pandemic?"


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Gene Detroyer
BrainTrust

Forgive my cynicism, but this is the opportunity all PE firms look forward to. IPO and get your money. Rarely do these plays make sense for the company and the likelihood that Joann’s success will continue into the future is nil.

Mark Ryski
BrainTrust

This seems a bit premature to me. Joann has struggled over the past few years, and while it’s true that the pandemic has created new demand for their products, it’s unclear how sustainable these current results will be after the pandemic is under control. Ultimately, shareholders and Wall Street demand continual growth in order to keep the stock price going up, and I’m not sure Joann will be able to sustain it. Furthermore, as a public company, they will be under pressure every quarter to deliver better results. This is a significant distraction to running the business.

Richard Hernandez
BrainTrust

Where is Joann in regards to rolling out the new concept from a few years ago? While I think the pandemic has helped with sales, I don’t know how long people are going to keep crafting once life gets back to normal so sustainability is a big question.

Gene Detroyer
BrainTrust

Yep, people are not going to stay at home and do crafts once this thing is over.

Ananda Chakravarty
BrainTrust

IPOs drive new cash and distributes ownership. The fact that Joann has been able to pull itself out of a debt filled rut is amazing, and Leonard Green as a private equity firm probably didn’t foresee this trend of Covid-19 impacting their business profitably.

For the PE firm, this offers capitalization and an exit strategy and now is a great time to pull out regardless of whether the post Covid-19 market for Joann is sustainable. For Joann as a company, the craft market has been growing prior to Covid-19 by about 5.3% from 2015-2020 (Ibisworld).

Competitors like Michael’s has been successful as well with comp store sales up ~16.3% in Q3 FY20. An IPO will transform Joann with much higher transparency and projects will be scrutinized more. Though notable, the steps Joann has taken to date won’t be enough to keep the momentum going — they will need to put some effort into expanding their business and find new ways to grow with their upcoming cash infusion.

wpDiscuz
Braintrust
"While I think the pandemic has helped with sales, I don’t know how long people are going to keep crafting once life gets back to normal."
"...as a public company, they will be under pressure every quarter to deliver better results. This is a significant distraction to running the business."
"Forgive my cynicism, but this is the opportunity all PE firms look forward to. IPO and get your money."

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