By Dietrich Knauth

NEW YORK, Jan 15 (Reuters) - Craft retailer Joann Inc filed for Chapter 11 protection in Delaware on Wednesday, saying that inventory shortages had forced it to back into bankruptcy for the second time in less than a year.

Joann said it intends to seek a buyer for its business, which has the "potential" to survive under the right ownership.

If no buyer emerges, Joann would allow Gordon Brothers Retail Partners LLC to liquidate all of its assets, including store inventory valued at $538.3 million, according to documents filed in Wilmington, Delaware, bankruptcy court.

Joann entered bankruptcy with $615.7 million in debt, after using its previous 2024 bankruptcy to eliminate $505 million in debt. The company had $2 billion in net sales in 2024, according to court documents.

Joann kept all of its retail stores open during its last bankruptcy. It currently has 800 stores in 49 states, with 19,000 employees.

Joann believed that its previous debt reduction deal would allow it to resume business as usual, but high inflation, increased competition, and supply chain disruption caused “irreparable harm” to its post-bankruptcy business plan, according to its court filings.

Joann suppliers eliminated some products the retailer relied on, while deliveries of other products such as yarn and sewing items became unpredictable, impairing Joann’s ability to serve as a one-stop-shop for its customers' craft and hobby projects, according to court documents.

In addition to its loans, Joann also owes over $133 million to its suppliers, and spends $26 million per month on rent at its stores, according to court filings.

Founded in 1943, the Ohio-based company is a leading national retailer of sewing, arts and crafts, as well as home décor products.

(Reporting by Dietrich Knauth; Editing by Mark Porter)

((Dietrich.Knauth@thomsonreuters.com;))