Claire’s latest US retailer to go bankrupt
For four decades Claire’s jewellery chain has been a fixture at malls and shopping centres, piercing the ears of millions of American teenagers.
But the company, which says it has pierced more than 100 million ears worldwide, is now struggling financially, with a heavy debt burden. And like so many other retailers, it is looking for help in bankruptcy court.
On Monday, Claire’s filed for Chapter 11 bankruptcy protection in Delaware, hoping to shed $1.9 billion in debt and close some underperforming stores.
The chain, which operates in 99% of US malls, selling low-priced cubic zirconia jewelry and other accessories, was purchased by private equity firm Apollo Global Management for $3.1 billion in 2007.
Claire’s called the filing an attempt to restructure its balance sheet, not its operations.
The company, which earned $29 million in profit last year and $1.3 billion in revenue, said that it was far healthier than fellow retailers that have also turned to bankruptcy — a growing list that includes mall regulars such as Gymboree, the Limited and Payless Shoes.
Toys ‘R’ Us, which often carried Claire’s products, said last week that it would liquidate or sell all of its 730 stores in the United States. Burdened with debt from a leveraged buyout in 2005, the toy giant struggled to adjust quickly enough to fastchanging consumer tastes and e-commerce encroachment.
But Claire’s, which presents itself as “A Girl’s Best Friend,” is hoping for a happier transition. The chain said that its earpiercing business is Amazon-proof because customers must show up in person for the service.
In a regulatory filing, the company acknowledged that mall traffic is declining and that it planned to close some of its underperforming stores and renegotiate leases.
The chain, which also owns the Icing brand, a jewellery chain targeting older shoppers, projected that its total store count in North America would slide to 1,400 locations in 2022 from 1,570 at the end of last year.
Claire’s said it secured $135 million in debtor-in-possession financing and support for its debt-slashing plan from toppriority debtholders such as Elliott Management and Monarch Alternative Capital hedge funds.
Apollo owns 97.7% of Claire’s, which had $2.1 billion in long-term debt at the end of 2017.
Claire’s said it was up to date with its vendor payments and had “ample liquidity.”
It plans to emerge from bankruptcy in September, before the crucial holiday season.
“We will complete this process as a healthier, more profitable company, which will position us to be an even stronger business partner for our suppliers, concessions partners, and franchisees,” Ron Marshall, Claire’s chief executive, said in a statement.
Claire’s said the bankruptcy would not disrupt store operations and would not affect its international subsidiaries.
Claire’s, which is based in Hoffman Estates, Illinois, traces its history to the founding of a chain of wig stores in the South in 1961. In 1973, the company blended with Claire’s Boutiques, a small accessories chain in the Midwest, creating Claire’s Stores.
The company began piercing ears in 1978. Last year, in the United States, it performed the service 3.5 million times.