Teen and tween retailer Claire’s, which has pierced 100 million ears, isn’t immune to pressures that are hurting mall traffic. However, with its motto of “A Girl’s Best Friend,” Claire’s hopes that its new, lighter balance sheet from its bankruptcy protection and restructuring will help it sidestep the fate of retailers like Toys “R” Us’ and continue to sell to consumers in real life.
After all, you can’t pierce your ears on Amazon.
Under the restructuring plan, Claire’s will reduce its overall indebtedness by $1.9 billion. According to Retail Dive, the lender group will provide debtor-in-possession financing and new capital to carry Claire’s through bankruptcy. That includes $75 million asset-based lending facility, a new $250 million first lien term loan and a $250 million preferred equity investment. Claire’s said it expects to complete the Chapter 11 process by September and would exit with $150 million in liquidity.
The company will continue operating roughly 1,600 Claire’s and Icing brand stores in the United States during the bankruptcy process. International stores are not part of the restructuring agreement.
Adding 4,000 Concessions
Claire’s remains confident that, through the restructuring process, it will cement its
position as one of the world’s leading specialty retailers of fashionable jewelry, accessories, and beauty products for young women, teens, “tweens” and kids for many years to come. In fact, Claire’s is growing, not shrinking, its business, according to the company, and plans its concessions business to grow by more than 4,000 stores in 2018.
“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. Mr. Marshall continued, “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.”
As background, private equity firm Apollo Management, bought Claire’s in 2007 for $3.1 billion, taking the company private. But slowing mall traffic and increased fast-fashion competition hurt sales and created a load of debt too big for Claire’s to surmount.