Claire’s files for Chapter 11
Mall jewelry chain Claire’s Stores has filed for Chapter 11 bankruptcy protection, hoping to escape huge debts preventing the company from shimmering in a dim environment for retail.
Claire’s is another victim of a string of private equity buyouts orchestrated by outside investors who loaded up on debt about a decade ago, saddling retailers with burdensome payments.
Others included Toys R Us, which last week gave up its fight to restructure its operations and decided to liquidate all of its U.S. stores, barring a last-minute chance to keep the 200 best locations open. Struggling malls, online competition and nimble physical competitors also have proved problematic.
Claire’s said it had secured support for a comprehensive debt-cutting campaign from its leading secured lenders, including hedge funds Elliott Management and Monarch Alternative Capital.
The retailer, known for its appeal to teens and for piercing more than
100 million ears worldwide, said it’s “confident” it will survive the bankruptcy filed in Delaware. The company also operates the Icing brand.
Claire’s said it would use the legal process to shed about $1.9 billion in debt and re-emerge as a healthier company in September, poised for a solid holiday shopping season.
The retailer, which sells products in more than 7,500 locations in 45 countries and employs about 17,000 people, signaled no plans to close stores. More than 5,300 of the company’s locations are in the U.S. — many of which amount to dedicated floor space with other retailers. The company has stores in about
99% of U.S. malls, according to a court 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,” Claire’s CEO Ron Marshall said in a statement.
“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.”
That the company was profitable in
2017 — it reported net income of
$29 million — follows a trend of retailers aiming to use bankruptcy to restructure before it’s too late.
Several retailers have filed for bankruptcy recently while still fundamentally profitable. But Claire’s is still facing challenges. Claire’s revenue fell from $1.5 billion in its 2014 fiscal year to $1.3 billion in 2017.