How in the Hell Did Joann Fabrics Die While Best Buy Survived? It Wasn't Amazon

Hacker News · Feb 23, 2026 · Collected from RSS

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Walk into a Best Buy today and the experience is fine-ish. The floors tend to be clean. The displays work. A blue-shirted employee can probably point you toward the right laptop, and if you’re lucky, the one who helps you actually knows the difference between the models. The Geek Squad desk may or may not have a line. The store-within-a-store sections for Samsung and Apple are slick and impersonal, but without the feel you get at a real Apple Store. It is competent, not revelatory. Best Buy became good enough, and in brick-and-mortar retail, good enough is a high bar.Now try to walk into a Joann Fabrics. You can’t. The last store closed on May 30, 2025. All 800-plus locations were liquidated. Nineteen thousand workers lost their jobs. But in the years before the end, former employees and customers described what it was like to watch the chain disintegrate from the sales floor: bare shelves, skeleton crews, fabric bolts in disarray, nobody at the cutting counter who knew what they were doing. A former district manager told Fortune the problem was self-inflicted: “the business is there.” What was missing was the capacity to run it properly. The stores had been hollowed out underneath the customers.Best Buy’s customer experience didn’t transform. It stabilized. The company stopped the bleeding, restored basic competence, matched Amazon’s prices, and gave vendors a reason to invest in its stores. That was enough. Joann, meanwhile, didn’t lose to some technological revolution that made fabric stores obsolete. It collapsed because it could no longer afford to stock its shelves, staff its cutting counters, or maintain the store experience that had sustained a loyal customer base for decades. Ninety-six percent of Joann’s stores were cash-flow positive when it first filed for bankruptcy in 2024. The demand was there. The business worked. Something else killed it.Understanding why businesses actually fail matters regardless of where you sit politically, because it is a matter of short- and long-term governance. When a retailer fails, state and local governments pick up the tab: lost sales tax revenue, unemployment insurance claims, economic development incentives to attract replacement employers. If those failures are driven by demand shifts, that spending is a reasonable cost of economic transition. If they’re driven by capital structure decisions made at acquisition, taxpayers are subsidizing the back end of a private transaction they had no part in. If we misdiagnose Joann as a story about consumer preferences or e-commerce disruption, every downstream decision, from unemployment policy to pension allocation, starts from the wrong premise.ShareIn 2010, Joann was the nation’s largest specialty fabric and craft retailer, founded in 1943 by two German immigrant families in Cleveland who combined the names of their daughters, Joan and Jacqueline Ann, to name the store. It had roughly 850 stores, carried zero debt, and its stock price hit a record high that year. In 2012, Best Buy’s stock had cratered below $15 per share. Analysts were writing its obituary. The company in crisis survived. The healthy one, beloved by wine moms, Etsy witches, and cosplayers, is gone.What it looks like is that Joann was targeted precisely because it was healthy. It was loaded with debt to finance its own acquisition, and milked for returns until it could no longer invest in adaptation. Category dynamics and management quality matter, and we’ll address them, but the balance sheet story comes first.The phrase “retail apocalypse” took off around 2017, when more than 12,000 physical stores closed in a single year. According to Coresight Research, U.S. retailers announced more than 7,300 store closures in 2024, a 57 percent increase over 2023. Projections for 2025 suggest closures could reach 15,000.The popular narrative attributes this to the “Amazon effect.” That’s a small part of the story. E-commerce still accounts for roughly 16 percent of total retail sales, per Census Bureau data. Amazon’s share of total U.S. retail is about 4 percent. Total retail sales have continued to grow. It’s a reshuffling, not an extinction.The Amazon narrative also flatters Amazon. Take Toys “R” Us: in 2000, the toy chain signed a 10-year exclusive deal to sell on Amazon’s platform, paying $50 million a year and effectively surrendering its own e-commerce development. By 2003, Amazon was letting competitors sell toys on the same platform. Toys “R” Us sued, won, and terminated the deal in 2006, but it had lost six years of e-commerce development during exactly the period when online retail was being built. The company that then got loaded with $5.3 billion in LBO debt in 2005 was already competing with one arm tied behind its back. When Toys “R” Us collapsed, the narrative was “Amazon killed the toy store.” And sure, Amazon helped, but it was the LBO that extracted the cash flow and actually killed the company. Amazon got the credit, which translated into a market narrative about e-commerce invincibility that has bolstered its valuation ever since.That narrative doesn’t hold up in reverse, either. Since acquiring Whole Foods for $13.7 billion in 2017, Amazon has failed at nearly every brick-and-mortar format it has attempted. In January 2026, it closed all its Amazon Fresh grocery stores and Amazon Go convenience stores, essentially admitting the stores didn’t work. Before that, it shuttered its bookstores, its 4-Star shops, and several other formats. Amazon is very good at bits but has repeatedly failed at atoms. On that note of Whole Foods, I don’t know if Errol Schweizer, Grocery Nerd would agree with anything I say, but he writes a great substack on broader grocery business. The retailers who actually did the hard work of going online get written out of the story. Walmart’s e-commerce share has grown from under 5 percent of its sales in 2018 to roughly 18 percent in 2024, with online sales growing 22 percent globally in fiscal Q4 2025. It leveraged 4,700 physical stores as fulfillment nodes, with 90 percent of Americans living within 10 miles of a Walmart. Home Depot acquired Blinds.com in 2014, an online-only window coverings retailer that was outperforming Home Depot in its own category, then used its e-commerce platform to build out broader online custom-order capabilities. The apocalypse narrative erases them.The other factors matter at least as much as e-commerce: an oversupply of retail square footage (mall construction between 1970 and 2015 grew at more than twice the rate of population), shifting consumer preferences, the aftershocks of the Great Recession, and the financial engineering of leveraged buyouts that loaded retail companies with debt they could not service, debt that consumed the cash flow they needed to adapt. A retailer that fails because customers no longer want what it sells is fundamentally different from a retailer that fails because its cash flow is consumed by debt service rather than reinvestment. Both are called “bankruptcy,” but the causal mechanisms and the policy implications are entirely different.When Hubert Joly took over as CEO in September 2012, rather than arriving with a grand strategy, he visited stores in a blue polo shirt tagged “CEO in Training.” He learned from a store employee at a pizza dinner that typing “Cinderella” into Best Buy’s search engine returned Nikon cameras.His operational moves were shrewd. He price-matched Amazon and converted showrooming from a vulnerability into a sales channel. He invited Samsung, Apple, Microsoft, and other vendors to create store-within-a-store experiences, turning Best Buy’s physical footprint into a marketing asset that vendors would pay to support. He made over $1 billion in cost cuts: supply chain optimization, shuttering the venture capital unit, and eventually hundreds of corporate layoffs. The layoffs came last, not first. He exited unprofitable international ventures, including the European joint venture with Carphone Warehouse and the 184-store Five Star chain in China.In 2011, the year before Joly arrived at Best Buy, private equity firm Leonard Green & Partners acquired Joann in an unsolicited bid for $1.6 billion, paying $61 per share, a 34 percent premium over the stock price when analysts were placing targets around $53. That premium itself became part of the debt burden.The acquisition was structured, as leveraged buyouts typically are, with the debt placed directly on Joann’s balance sheet. The buyout was financed by JPMorgan Chase, Bank of America, and TCW/Crescent Mezzanine. Overnight, a company with zero debt became a company with more than a billion dollars in obligations, plus annual management fees of $5 million payable to Leonard Green.The standard PE narrative holds that private equity firms acquire underperforming companies, bring operational discipline, and generate returns through genuine improvement. A European study published in the Journal of Corporate Finance, examining buyout targets across 15 EU countries, found the opposite: PE firms typically select companies with lower financial distress risk. Being good at what you do makes you a target for extraction, not a beneficiary of improvement. Joann, debt-free and profitable, was the model LBO candidate.From 2012, the paths diverged. Joly had the luxury of retaining Best Buy’s cash flow for reinvestment. Non-GAAP return on invested capital rose from 9.2 percent in fiscal 2012 to 13.6 percent by fiscal 2016. Employee turnover was cut in half. Total shareholder return from the end of fiscal 2013 to Joly’s departure in 2019 was 335 percent, compared to 104 percent for the S&P 500.At Joann, every dollar generated had to be divided between operating the business and servicing debt, including Leonard Green’s management fees, which totaled roughly $50 million over the ownership period. Interest payments in some years topped $100 million on a business with thin retail margins. Debt peaked at $1.3 billion i