Claire’s, the beloved — particularly amongst tween girls — jewelry and accessories chain, has once again declared Chapter 11 bankruptcy protection. This is their second ReBuild proposal since 2018. Founded in 1974 and based in Hoffman Estates, Illinois, the company has established an impressive international footprint of more than 2,750 locations – with markets in both North America and Europe. Besides these, they run 190 Icing retail stores across North America. However, the company is still staring at large financial woes. It has been beating back the headwinds of a very high debt load and a retail environment that is ever more tilted to e-commerce.
The filing provides Claire’s with an opportunity to restructure its business, and customers will continue to shop at Claire’s North American stores. The corporation agrees not to cut employees’ wages and benefits during the company’s bankruptcy restructuring period. Claire’s announced it would be pursuing approval to use cash collateral to fund day-to-day operations throughout this transition.
The fiscal impact of the bankruptcy is massive. Claire’s estimated overall net worth is somewhere between $1 billion and $10 billion. The bankruptcy that followed was due in large part to the company’s debt load. Meanwhile, shifting consumer trends had many teens doing much of their shopping online rather than going to malls and department stores in person. Yet this radically changed landscape has led Claire’s unable to successfully compete in a rapidly catastrophically e-commerce biased market.
Given such challenges, Claire’s intent to leave no stone unturned as it considers strategic alternatives to right size its business. In a statement, the company’s CEO, Chris Cramer, said filing for Chapter 11 was an excruciating decision, but that the move was required.
“This decision is difficult, but a necessary one.” – Chris Cramer
Market analysts have noted that Claire’s faces an uphill battle as it attempts to reinvent itself amid rising competition and shifting consumer spending trends. Indeed, retail expert Neil Saunders said that the company has a tough road ahead.
“Reinventing will be a tall order in the present environment.” – Neil Saunders
Claire’s has been locked in a years-long death spiral under the burden of crippling debt levels that have pushed its business model ever closer to collapse. The bad news is that the recent retail environment has added insult to injury, with consumers noticeably moving away from in-person shopping. The business needs to move fast in order to pivot or perish. If it hopes to reestablish itself in this new, quickly evolving market, it needs to move quickly.
As Claire’s transitions through phase one of this restructuring process, it’s still very much in business with its customers and therefore their employees. The automobile manufacturer seeks to come out of the bankruptcy proceeding a more efficient organization, better able and more attuned to serving the needs of today’s consumers.
