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Joann Fabrics makes cuts, faces Nasdaq delisting, cash crunch
The company has issued a warning and laid off staff, but that may not stop it from running out of cash (even though it insists it won’t).
People build an emotional connection to stores when a retailer's offerings intersect with their hobbies.
Readers, for example, fondly remember Borders Books and Waldenbooks, even though those two retailers disappeared years ago. Athletes, hikers, golfers, and other sporting enthusiasts felt the same way about Sports Authority, Olympia Sports, and Modell's Sporting Goods.
DON'T MISS: Another iconic retailer survived bankruptcy but nears its sad end
For many people, these weren't just another store. These were the retailers that stocked the items that they were most passionate about. Losing these chains was devastating for hundreds of thousands, maybe millions, of people because these retailers were places to browse, hang out, and dream even when you weren't shopping.
Now, another well-loved big box store that serves a passionate audience has run into some major financial concerns. The chain has not used the word "bankruptcy," in its most recent SEC filing, but it's running low on cash, has made significant layoffs, and runs the risk of being delisted from NASDAQ because it has not remained in compliance with listing requirements.
Joann Fabrics paints a bleak picture
Joann Fabrics (JOAN) - Get Free Report has been racing to make cuts and win pricing concessions from its vendors because the chain understands the environment it's operating in. Christmas Tree Shops and Bed Bath & Beyond both had loyal customer bases but went bankrupt because they could not find the cash needed to fund their operations.
That's a risk Joann Fabrics runs because the company has only $19.1 million in cash on hand while it has over $1 billion in debt. The company also saw its quarterly loss rise to $73 million compared to $56.9 million in the previous quarter.
Add in that the company runs the risk of being delisted — a move that would make it harder to raise needed capital — and it's not hard to see how bleak the chain's reality has become.
Joann Fabrics describes itself as "the nation’s category leader in Sewing, with one of the largest assortments of arts and crafts products. The chain opened 2022 with about 22,000 full-time, part-time, seasonal, and temporary workers. It operates 829 physical stores in 49 states as of late August.
Joann Fabrics believes it will survive
While it has over $1 billion in debt and saw its interest expense double over the past six months from $27.7 million to $52.1 million, the company believes it can survive. It detailed its financing picture in its SEC filing.
We have three principal sources of liquidity: cash and cash equivalents on hand, cash from operations and available borrowings under our ABL (asset based loan) Facility. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary. We believe that our cash and cash equivalents on hand, cash from operations and availability under our ABL Facility will be sufficient to cover our working capital, capital expenditure and debt service requirement needs, as well as dividend payments and share repurchases,
The company does remain in compliance with its loans, which are secured by its inventory. Joann Fabrics does not currently have a CEO, but it's interim leadership laid out its plans in its second-quarter earnings release.
“In addition to stabilizing our topline, we remain focused on operating as efficiently as possible.” said CFO, and interim co-CEO Scott Sekella. “With another quarter of execution of our Focus, Simplify and Grow initiative, we continue to drive operational excellence with our cost-cutting initiatives leading to an over delivery on the targeted $200 million of annual cost reductions.”
You can't cut your way to success. Reducing expenses can buy time for a turnaround plan to work, but Joann currently needs to conserve cash because it has mounting debt and a nearly empty bank account.
Bankruptcy became an unavoidable issue for Bed Bath & Beyond and Christmas Tree Shops when vendors stopped being willing to ship goods to both chains over fears of not getting paid. Once companies start demanding upfront payments, cash needs increase exponentially and the end often comes quickly.
Those aren't scenarios companies talk about openly. They always issue statements about how their cost-cutting measures are working and their balance sheets are improving. That often, not always, proves to be a best-case-scenario view of the results and not a purely realistic one.
An email to Joann Fabrics' corporate communications office was not immediately returned.
bankruptcy nasdaqUncategorized
Shipping company files surprise Chapter 7 bankruptcy, liquidation
While demand for trucking has increased, so have costs and competition, which have forced a number of players to close.
The U.S. economy is built on trucks.
As a nation we have relatively limited train assets, and while in recent years planes have played an expanded role in moving goods, trucks still represent the backbone of how everything — food, gasoline, commodities, and pretty much anything else — moves around the country.
Related: Fast-food chain closes more stores after Chapter 11 bankruptcy
"Trucks moved 61.1% of the tonnage and 64.9% of the value of these shipments. The average shipment by truck was 63 miles compared to an average of 640 miles by rail," according to the U.S. Bureau of Transportation Statistics 2023 numbers.
But running a trucking company has been tricky because the largest players have economies of scale that smaller operators don't. That puts any trucking company that's not a massive player very sensitive to increases in gas prices or drops in freight rates.
And that in turn has led a number of trucking companies, including Yellow Freight, the third-largest less-than-truckload operator; J.J. & Sons Logistics, Meadow Lark, and Boateng Logistics, to close while freight brokerage Convoy shut down in October.
Aside from Convoy, none of these brands are household names. but with the demand for trucking increasing, every company that goes out of business puts more pressure on those that remain, which contributes to increased prices.
Another freight company closes and plans to liquidate
Not every bankruptcy filing explains why a company has gone out of business. In the trucking industry, multiple recent Chapter 7 bankruptcies have been tied to lawsuits that pushed otherwise successful companies into insolvency.
In the case of TBL Logistics, a Virginia-based national freight company, its Feb. 29 bankruptcy filing in U.S. Bankruptcy Court for the Western District of Virginia appears to be death by too much debt.
"In its filing, TBL Logistics listed its assets and liabilities as between $1 million and $10 million. The company stated that it has up to 49 creditors and maintains that no funds will be available for unsecured creditors once it pays administrative fees," Freightwaves reported.
The company's owners, Christopher and Melinda Bradner, did not respond to the website's request for comment.
Before it closed, TBL Logistics specialized in refrigerated and oversized loads. The company described its business on its website.
"TBL Logistics is a non-asset-based third-party logistics freight broker company providing reliable and efficient transportation solutions, management, and storage for businesses of all sizes. With our extensive network of carriers and industry expertise, we streamline the shipping process, ensuring your goods reach their destination safely and on time."
The world has a truck-driver shortage
The covid pandemic forced companies to consider their supply chain in ways they never had to before. Increased demand showed the weakness in the trucking industry and drew attention to how difficult life for truck drivers can be.
That was an issue HBO's John Oliver highlighted on his "Last Week Tonight" show in October 2022. In the episode, the host suggested that the U.S. would basically start to starve if the trucking industry shut down for three days.
"Sorry, three days, every produce department in America would go from a fully stocked market to an all-you-can-eat raccoon buffet," he said. "So it’s no wonder trucking’s a huge industry, with more than 3.5 million people in America working as drivers, from port truckers who bring goods off ships to railyards and warehouses, to long-haul truckers who move them across the country, to 'last-mile' drivers, who take care of local delivery."
The show highlighted how many truck drivers face low pay, difficult working conditions and, in many cases, crushing debt.
"Hundreds of thousands of people become truck drivers every year. But hundreds of thousands also quit. Job turnover for truckers averages over 100%, and at some companies it’s as high as 300%, meaning they’re hiring three people for a single job over the course of a year. And when a field this important has a level of job satisfaction that low, it sure seems like there’s a huge problem," Oliver shared.
The truck-driver shortage is not just a U.S. problem; it's a global issue, according to IRU.org.
"IRU’s 2023 driver shortage report has found that over three million truck driver jobs are unfilled, or 7% of total positions, in 36 countries studied," the global transportation trade association reported.
"With the huge gap between young and old drivers growing, it will get much worse over the next five years without significant action."
Related: Veteran fund manager picks favorite stocks for 2024
bankruptcy bankruptcies pandemic stocks commoditiesUncategorized
Wendy’s has a new deal for daylight savings time haters
The Daylight Savings Time promotion slashes prices on breakfast.
Daylight Savings Time, or the practice of advancing clocks an hour in the spring to maximize natural daylight, is a controversial practice because of the way it leaves many feeling off-sync and tired on the second Sunday in March when the change is made and one has one less hour to sleep in.
Despite annual "Abolish Daylight Savings Time" think pieces and online arguments that crop up with unwavering regularity, Daylight Savings in North America begins on March 10 this year.
Related: Coca-Cola has a new soda for Diet Coke fans
Tapping into some people's very vocal dislike of Daylight Savings Time, fast-food chain Wendy's (WEN) is launching a daylight savings promotion that is jokingly designed to make losing an hour of sleep less painful and encourage fans to order breakfast anyway.
Promotion wants you to compensate for lost sleep with cheaper breakfast
As it is also meant to drive traffic to the Wendy's app, the promotion allows anyone who makes a purchase of $3 or more through the platform to get a free hot coffee, cold coffee or Frosty Cream Cold Brew.
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Available during the Wendy's breakfast hours of 6 a.m. and 10:30 a.m. (which, naturally, will feel even earlier due to Daylight Savings), the deal also allows customers to buy any of its breakfast sandwiches for $3. Items like the Sausage, Egg and Cheese Biscuit, Breakfast Baconator and Maple Bacon Chicken Croissant normally range in price between $4.50 and $7.
The choice of the latter is quite wide since, in the years following the pandemic, Wendy's has made a concerted effort to expand its breakfast menu with a range of new sandwiches with egg in them and sweet items such as the French Toast Sticks. The goal was both to stand out from competitors with a wider breakfast menu and increase traffic to its stores during early-morning hours.
Wendy's deal comes after controversy over 'dynamic pricing'
But last month, the chain known for the square shape of its burger patties ignited controversy after saying that it wanted to introduce "dynamic pricing" in which the cost of many of the items on its menu will vary depending on the time of day. In an earnings call, chief executive Kirk Tanner said that electronic billboards would allow restaurants to display various deals and promotions during slower times in the early morning and late at night.
Outcry was swift and Wendy's ended up walking back its plans with words that they were "misconstrued" as an intent to surge prices during its most popular periods.
While the company issued a statement saying that any changes were meant as "discounts and value offers" during quiet periods rather than raised prices during busy ones, the reputational damage was already done since many saw the clarification as another way to obfuscate its pricing model.
"We said these menuboards would give us more flexibility to change the display of featured items," Wendy's said in its statement. "This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants."
The Daylight Savings Time promotion, in turn, is also a way to demonstrate the kinds of deals Wendy's wants to promote in its stores without putting up full-sized advertising or posters for what is only relevant for a few days.
Related: Veteran fund manager picks favorite stocks for 2024
stocks pandemicUncategorized
Comments on February Employment Report
The headline jobs number in the February employment report was above expectations; however, December and January payrolls were revised down by 167,000 combined. The participation rate was unchanged, the employment population ratio decreased, and the …
Prime (25 to 54 Years Old) Participation
Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.
The 25 to 54 years old participation rate increased in February to 83.5% from 83.3% in January, and the 25 to 54 employment population ratio increased to 80.7% from 80.6% the previous month.
Average Hourly Wages
The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).
Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.3% YoY in February.
Part Time for Economic Reasons
From the BLS report:
"The number of people employed part time for economic reasons, at 4.4 million, changed little in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."The number of persons working part time for economic reasons decreased in February to 4.36 million from 4.42 million in February. This is slightly above pre-pandemic levels.
These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.3% from 7.2% in the previous month. This is down from the record high in April 2020 of 23.0% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is above the 7.0% level in February 2020 (pre-pandemic).
Unemployed over 26 Weeks
This graph shows the number of workers unemployed for 27 weeks or more.
According to the BLS, there are 1.203 million workers who have been unemployed for more than 26 weeks and still want a job, down from 1.277 million the previous month.
This is close to pre-pandemic levels.
Job Streak
Headline Jobs, Top 10 Streaks | ||
---|---|---|
Year Ended | Streak, Months | |
1 | 2019 | 100 |
2 | 1990 | 48 |
3 | 2007 | 46 |
4 | 1979 | 45 |
5 | 20241 | 38 |
6 tie | 1943 | 33 |
6 tie | 1986 | 33 |
6 tie | 2000 | 33 |
9 | 1967 | 29 |
10 | 1995 | 25 |
1Currrent Streak |
Summary:
The headline monthly jobs number was above consensus expectations; however, December and January payrolls were revised down by 167,000 combined. The participation rate was unchanged, the employment population ratio decreased, and the unemployment rate was increased to 3.9%. Another solid report.
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