Hancock Fabrics Goes Out of Business

Man and woman in a fabric store
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When Hancock Fabrics filed for Chapter 11 in February 2016, the company began closing its stores and selling its products at discounted prices. Fortunately, Michaels Co. bought Hancock Fabrics for $1.3 million, therefore saving the company from bankruptcy.

Hancock Fabric's Reorganization Plan

It was the second time in a decade that the retail chain specializing in fabrics, home decor, craft supplies, and hobbies had found itself in bankruptcy court. The plan for Hancock's 2016 Chapter 11 reorganization was to immediately start Going Out of Business sales at 70 of its most underperforming retail locations and continue with business-as-usual operations at 185 stores. 

However, two months later, the last leadership team in the 59-year history of Hancock Fabrics announced that every Hancock Fabrics retail location was officially closing. This marked the demise of Hancock Fabrics retail history with 255 stores in 37 states. 

Reasons for Hancock Fabrics' Failure

It was partly a pension and employee benefits program that was underfunded by $44 million that led Hancock Fabrics leaders to bankruptcy court. But it was retail relevance that didn't allow the company to escape intact or in business. Even though there was only one major national competitor, JOANN, the fabric-consuming market couldn't support both of these big-box niche retailers.

Increasing Competition

So, much like the Circuit City, Borders, and Linens 'n Things chains that passed into extinction before it, Hancock couldn't win in the survival-of-the-fittest environment of shrinking demand, and unlimited competition that defined the rapidly evolving U.S. retail industry. But, also like Best Buy, Barnes & Noble, and Bed Bath & Beyond, the spoils didn't guarantee that the victor would remain victorious or even that it would survive. 

Outdated Big-Box Niche Retailer

The same category-killing niche stores that steamrolled over helpless independent retailers during the burgeoning big-box boom of the '70s were now all about "small format," "rightsizing." and "localization." In other words, over-niched, category-killing, big-box retailers like Hancock Fabrics were too big, slow, and impersonal to sustain any meaningful competitive advantage over a retail seller with a right-fit product, a Wi-Fi connection, and an Amazon Seller account.  

So even with years of successful retailing experience, national brand recognition, and a brick-and-mortar presence in many states, one of the largest U.S. retail chains once again proved that there's no such thing as too big to fail. If not for the sale of Hancock Fabrics to Michaels, the company would have taken its place among the growing list of once thriving, but no longer surviving, bankrupt U.S. retail chains.