Claire's latest retailer to file for bankruptcy protection
Claire's Stores is the latest victim of declining traffic at U.S. malls. The retailer that caters to adolescent girls with makeup, jewelry and ear piercings on Monday filed for Chapter 11 bankruptcy protection, saying it had an agreement with creditors to restructure about $1.9 billion in debt.
The move has Claire's following other recent bankruptcies by U.S. retailers including toy seller Toys "R" Us, athletic gear seller the Sports Authority and kids clothing chain Gymboree.
The company in a statement said it was confident it would come through the restructuring process, and plans to come out of Chapter 11 in September with more than $150 million in cash.
"This transaction substantially reduces the debt on our balance sheet," Ron Marshall, Claire's CEO, said in the statement. "We will complete this process as a healthier, more profitable company."
The company's comeback strategy relies in large part on ear piercing, a service it has offered since 1978 and that can't be offered online.
"The company estimates that it has pierced over 100,000,000 ears worldwide," Scott Huckins, Claire's CFO, stated in the bankruptcy filing.
While compelling "over the long term," Claire's business model wasn't enough to keep the debt-saddled company going amid a year-over-year 8 percent drop in mall traffic, Huckins added.
Private-equity firm Apollo Global Management holds a 97 percent stake in Claire's, and pushed the initial buyout plan.
The chain has been dogged by claims that some of its makeup products contained asbestos, which first surfaced in December and persisted even as it has pulled products off the shelves.
The retailer, which operates in more than 7,500 locations in 45 nations, employs about 17,000 people. Claire's did not indicate it planned to close any of its stores, and its international subsidiaries are not part of the U.S. bankruptcy filing.
