Claire’s files for US Chapter 11 bankruptcy protection
Claire’s, the low-cost chain of accessory shops particularly popular with pre-teen girls, has become the latest victim of the global retail crisis. The company announced yesterday that it had filed for Chapter 11 bankruptcy protection for its US operations in a court in Delaware, and that it had reached an agreement with creditors to restructure vast amounts of its outstanding debt.
Claire’s is the latest in a string of high-street retailers to restructure its finances. Many have been felled by changing consumer habits and the rapid rise of e-commerce rivals like Amazon. Last week, Toys R Us, which filed for bankruptcy protection in the US in 2017 and went into liquidation in the UK earlier this
year, said that it would close all of its 885 US stores, risking up to 33,000 jobs. More than 8,000 US retail stores were forced to shut last year, which was roughly double the average annual store closures in the previous decade, according to data from the International Council of Shopping Centres, cited by Reuters.
In the UK, companies like Maplin have been crippled by rising business rates, an increase in wages and a jump in inflation as a result of the dramatic fall in the value of the pound, in the immediate aftermath of June 2016’s Brexit vote.
More than $1.4bn (£1.01bn) of Claire’s debt had been due next year and despite earlier efforts to restructure its liabilities, cash has largely dried up. Filing for Chapter 11 bankruptcy protection gives the company the opportunity to keep operating while it negotiates a plan with debtors and investors to turn the business around. Under the restructuring agreement with a group of creditors led by Elliott Management and Monarch Alternative Capital LP, Claire’s will be provided with about $575m of new capital.
Based on this, Claire’s said that it expects to complete the Chapter 11 process in September this year, and emerge from bankruptcy with over $150m of liquidity. It also said that it expects to reduce its overall indebtedness by approximately $1.9bn. The retailer’s international subsidiaries are not part of the US filing.
“This transaction substantially reduces the debt on our balance sheet and will enhance our efforts to provide the best possible experience for our customers,” said Ron Marshall, Claire’s chief executive officer. “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,” he added.
Claire’s is one of the world’s largest specialty retailers of fashion jewellery and accessories for young women. It sells its products in over 7,500 locations across 45 countries through company-owned stores, as well as concessions and franchise locations. It’s particularly known for its ear piercing service, and claims to have pierced over 100 million ears worldwide since it started providing the service in 1978.