What Is a Liquidation Sale? Joann Bankruptcy Highlights a Retail Crisis

In February 2025, Joann Stores – a retail staple in the U.S. craft and fabric industry for decades, opened liquidation sales at 533 of its close to 800 stores. This drastic action comes on the heels of a second bankruptcy filing in only one year and prompts immediate questions from consumers and retailers alike: What is a liquidation sale, and what does a liquidation sale mean for an organization, its people, and its sector?

What Is a Liquidation Sale?

A liquidation sale occurs when a business closes out its merchandise at discounted prices, usually due to closing locations or going out of business. The purpose is to realize as much of the merchandise into cash as quickly as possible, usually to satisfy creditors or shut down operations.

In Joann’s instance, the court-approved liquidation sales represent a shift in a sharp turn for the worse. After coming out of a previous bankruptcy in April 2024 on a hopeful note, Joann now stands to see the end of its 80-year history unless a rescue bidder emerges at the eleventh hour.

What Does Liquidation Sale Mean for Joann?

Liquidation doesn’t necessarily equal clearance sales, it represents a potential corporate meltdown. Joann’s recent court documents reveal that liquidation firms, rather than strategic buyers, have shown genuine interest in the company. Included among them is Gordon Brothers, a familiar retail liquidator that has worked on closures for Toys R Us, Party City, and Big Lots.

Bankruptcy Judge Craig T. Goldblatt recently ruled that 1903P—an affiliate of Gordon Brothers—must step back from consulting on the sale due to conflicts of interest. “You’re either a buyer or seller, not both,” the judge stated, hinting at legal tension surrounding the sale process.

If no operational buyer emerges by the February 18 deadline, the liquidation process could proceed rapidly, with going-out-of-business sales finalized by May 31.

A Look at Joann’s Background

Joann started out as the Cleveland Fabric Shop in 1943 and ultimately grew into one of America’s leading craft stores. Throughout the decades, it swallowed up its rivals such as Cloth World and House of Fabrics, and even went public again in 2021 due to robust pandemic-era sales.

But by March of 2024, Joann sought Chapter 11 bankruptcy, listing more than $1 billion in long-term debt. Even though restructuring reduced debt to almost half and enabled stores to remain open, the following year, the company was again in decline.

What Went Wrong?

Joann “oozed a great deal of confidence,” according to restructuring expert Scott Y. Stuart, but could not restock merchandise and reach sales goals. Supplier delays following the 2024 bankruptcy, combined with inflation and high interest rates, were key factors.

Whereas Joann attributed the blame to supply chain problems, others attribute it to mismanagement and poor customer experience. Reddit forums have pointed out how even top-performing stores—some with more than $3 million in sales annually—were slated for closure. Meanwhile, employees complained of minimal staffing and disengaged corporate management.

Industry-Wide Consequences

Joann’s unraveling affects more than just its own workforce. The company employed nearly 19,000 people as of January 2025, including about 900 at its Hudson, Ohio headquarters. For domestic suppliers, Joann was a major client—65% of their inventory was sourced locally in 2024.

Smaller companies, such as quilting company Legit Kit,s are also unsure of what is happening. Owner Michael O’Dell said Joann previously held back on paying for months when it went through bankruptcy in 2024 and could default entirely this time. “If they go out, we will lose all the money,” he said.

The 2025 filing has $615.7 million of total debt and $133 million due to merchandise vendors, a change from fabric-oriented suppliers to home decor and kit suppliers. As one industry executive noted, Joann’s struggles reflect a wider decline of brick-and-mortar retailing.

What Liquidation Sales Mean for Shoppers

For shoppers, liquidation sale equals deep discounts—but also diminishing service, inconsistent inventory, and store closures. If Joann goes through with liquidation, anticipate quick sales of sewing machines, yarn, fabric, crafts, and seasonal decorations.

Prices in the early days of liquidation won’t necessarily be as low as they seem, though. Professional liquidators tend to inflate prices initially before discounting them to give the appearance of savings. Bottom line: shop smart.

The Bigger Picture: Retail’s Changing Landscape

Retail experts forecast that 2025 may witness up to 15,000 store closures—nearly twice the number of closures last year. WD Partners experts contend that conventional retailers must move away from skeleton-staffing and back toward experiential, community-based in-store models.

Joann’s experience confirms that. Even with loyal customers and a favorite brand, the company forgot what made it special: informed employees and a vast array of fabrics. By reducing costs in the wrong areas, it drove away its core clientele.

Although the prognosis is grim, the Joann brand still has worth. A campaign called #everybodylovesjoann has caught on online, with thousands of shoppers and employees posting memories and support.

Others propose that Joann might survive as a licensed brand—available in other stores or reborn on the web—if not as a retail chain. “The suppliers are upset, but the customers are just sad,” said Darrin Stern of Koelnmesse, an international trade fair organization.

Whether by licensing, relaunching online, or a surprise investor, the fate of Joann is unclear. But for the moment, its liquidation sales are a cautionary tale of ambition, missteps, and the shifting sands of retail.