By Delaney Newhouse | Focus Editor
For many consumers, Radio Shack was first.
Circuit City had long been pushed out of the electronics game, leaving Best Buy as its greatest competitor. Still, after nearly 100 years in business, Radio Shack filed for bankruptcy in February 2015.
In 2016, the trend hit the sports world. Sports Authority stores closed and immediately began liquidation after filing Chapter 11 proceedings.
In 2017, the children felt it: Payless Shoe Source and Toys “R” Us, both American strip mall staples, filed. Claire’s stores followed in 2018, as did Sears.
These retailers had two things in common. The first, online competition, is unsurprising.
The second? Hedge funds.
In a 2023 NPR segment, financial journalist Gretchen Morgenson explained the process private equity firms use to expand their profits by buying businesses, often referred to as “buying to sell.”
“Private equity firms are what used to be called leveraged buyout funds and firms,” Morgenson said. “You remember these maybe from the ’80s and the ’90s, but they changed their name. They basically buy companies, load them up with debt and then they have to meet those debt obligations, and they strip assets. They often lay off employees to do so. They cut costs to try to improve profitability, and then they hope to sell the company to another buyer in, say, five years or so.”
The latest victim of private equity appears to be JOANN Fabric and Crafts, a nationwide chain of craft stores. For the second time in less than a year, JOANN filed for bankruptcy in January.
San Carlos, Calif. sophomore Caitlynn Reynolds has largely moved past JOANN at this point in her sewing journey. She said she prefers online shopping, remaking old clothing or sourcing from sustainable materials to buying new fabric for her various projects.
“I like to secondhand a lot of my materials,” Reynolds said. “I honestly haven’t been working with fabric by the bolt recently. I just try to get stuff from thrift stores or estate sales.”
JOANN, like Sports Authority, was acquired by PEF Leonard Green & Partners. After an initial public offering in 2021, the specialty craft retailer filed Chapter 11 proceedings in March of 2024, cancelling the shares of any stockholders. A month later, it exited proceedings as a private company. Now, it plans to close all 800 stores and ceased online business on March 4. Sham businesses have popped up on social media sites pretending to be the crafts giant.
It’s when looking for fabric online that Reynolds said she often found herself wandering into stores like JOANN. She said she prefers the greater breadth of options available online, but being able to look at and feel fabrics in person affords more convenience.
“First I’ll go into the store, and then I’ll buy it online where it’s cheaper,” Reynolds said.
School of Education’s associate professor Karon LeCompte said she often looked to JOANN when creating Christmas decorations and animal characters with her elementary education classes in the Moody Makerspace.
“I was pretty sad because they have a wide variety, but I could tell early on that their merchandise on the shelves was getting smaller and smaller,” LeCompte said. “I do love JOANN. I hope they remain open, because the people there, they have people who have been working there for 15 years, as long as I’ve been in Waco.”
Chula Vista junior Michael Gerken works in the Moody Makerspace. He bought specialty fabrics at JOANN and said the store closures were devastating.
“I’ve had to buy fabrics 10 weeks, 12 weeks in advance for projects I didn’t even think I’d have to buy them for,” he said. “I always enjoyed going to JOANN. They have the best fabric selection; maybe I’ll have to pivot and go somewhere else.”
PEFs are not only involved in buyouts of retail brands, but also the information and health care sectors. Morgenson said that 30% of private hospitals and 40% of American emergency departments are operated by private equity. In a Politico article, American University professor Margot Susca said that firms like Alden Global Capital are largely behind the decline of local journalism.
“Before and after the recession, investment firms and the private equity divisions of Wall Street banks created conditions that left newspaper chains hamstrung and in debt for billions of dollars after a wave of acquisitions and consolidations,” Susca said. “Different private firms then profited off newspaper bankruptcies or debt financing.”
While investors make money from leveraged buyouts, customers looking to buy fabrics are left to look elsewhere. Historically, competitors like Michaels and Hobby Lobby have limited fiber arts sections, leaving fiber artists to look solely to JOANN. LeCompte has noticed a bit of a recent change.
“We have other locations in Waco that seem to have stepped up, like Hobby Lobby and Michaels are adding to their fabrics and their sewing selection,” she said.
