Fashion jewelry retailer Claire’s has filed for bankruptcy protection in the US for the second time, as shrinking consumer spending continues to take a toll on sales.
In a filing with the US Bankruptcy Court for the District of Delaware, the company reported assets and liabilities each ranging between $1 billion and $10 billion. Claire’s also disclosed having between 25,001 and 50,000 creditors.
The company’s Canadian affiliate, which operates Claire’s stores throughout Canada, plans to initiate proceedings under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.
Claire’s retail stores across North America will remain open and continue serving customers as the company explores all strategic options.
“This decision is difficult, but a necessary one. Increased competition, consumer spending trends and the ongoing shift away from brick-and-mortar retail, in combination with our current debt obligations and macroeconomic factors, necessitate this course of action for Claire’s and its stakeholders,” said Chris Cramer, CEO of Claire’s.
“We remain in active discussions with potential strategic and financial partners and are committed to completing our review of strategic alternatives.”
Neil Saunders, MD of GlobalData, said the bankruptcy comes as no real surprise. “The chain has been swamped by a cocktail of problems, both internal and external, that made it impossible to stay afloat,” he said.
“Internally, high debt levels have made operations very unstable. Claire’s has struggled to simultaneously manage its debts and service day-to-day operations. The prospects of it being able to pay loans as they become due are extremely slim. This cash crunch left it with little choice but to reorganize through bankruptcy.
“Internal issues have been exacerbated by a range of external factors. Most recently, tariffs have pushed costs higher, and Claire’s is not in a position to manage this effectively,” Saunders observed.
“Competition has also become sharper and more intense over recent years, with retailers like Lovisa offering younger shoppers a more sophisticated assortment at value prices. This is more attuned to what younger consumers want and has left Claire’s looking somewhat out of step with modern demand.
“Amazon and other online players have also turned the screw, especially as visits to some secondary malls where Claire’s is present have waned.”
Second filing
This marks the retailer’s second Chapter 11 filing in recent years. Claire’s previously sought bankruptcy protection in 2018, emerging later that same year after a restructuring that saw $1.9 billion in debt restructured.
Claire’s has a global presence of more than 2700 stores, particularly strong in North America and Europe.
Back in June, the company was reportedly exploring a potential sale, citing headwinds such as tariffs and intensifying competition. According to Bloomberg, Claire’s hired investment bank Houlihan Lokey to assist in identifying prospective buyers, based on information from sources familiar with the matter.
Since then, various business media have reported that some landlords had not been paid rent in June and July, and that the company was struggling to refinance a multimillion-dollar loan set to fall due this month.
Saunders said that while there is likely a place for Claire’s in the market, it will need to use bankruptcy to slim down, shed debt, and shutter weaker stores.
“Reinventing will be a tall order in the present environment,” he concluded.
