Another domino falls in the retail sector as the bankruptcy of craft giant Joann drags down a key supplier.
According to the Daily Mail, the downfall of Joann, a major crafts retailer, has now claimed Design Group Americas (DGA), a gift-wrap manufacturer, which filed for bankruptcy on Sunday in the US Bankruptcy Court in Houston, citing economic woes and the loss of Joann’s business as critical blows.
Joann’s troubles began mounting long before this year, with its first bankruptcy filing in March of the previous year.
Despite warnings, Joann, which once operated around 800 stores across nearly every state, refused to close unprofitable locations or consolidate operations after that initial filing.
This stubborn stance led to a staggering debt load of over $600 million by January, when it filed for bankruptcy a second time in less than a year.
Ultimately, Joann shut all its stores, leaving suppliers like DGA reeling from the loss of a major customer that accounted for $27.4 million, or 5% of DGA’s revenue last year.
DGA’s filing reveals a perfect storm of challenges: a tough economic climate, declining consumer spending on discretionary items like ribbons and wrapping paper, and tariff uncertainties that made import costs unpredictable.
American consumers, squeezed by the rising cost of essentials, have pulled back on non-essential purchases for years, hitting DGA’s bottom line hard.
Adding to the pain, court documents show DGA burdened with $106 million in unsecured debts, a load too heavy to carry without Joann’s orders.
The fallout from DGA’s bankruptcy puts over 1,400 jobs at risk across North America, India, Hong Kong, China, the UK, and Australia.
As part of its restructuring, DGA plans to sell assets, including its wrapping paper and sewing businesses, as a going concern while winding down its ribbon manufacturing operations.
Its parent company, UK-based IG Design Group, sold its stake to financial services firm Hilco Global in May, with Hilco now stepping in to finance the bankruptcy process with $53 million.
Joann’s story mirrors broader retail struggles, as it enjoyed a sales surge during the pandemic when Americans, stuck at home, turned to crafting hobbies, only to see revenue tank as those trends faded.
Similar headwinds have struck others, such as The Container Store, a home organization retailer, which also filed for bankruptcy in December, signaling a rough road ahead for discretionary retail in this economy.