Claire’s files for bankruptcy again as debt pile looms

Tween retailer Claire’s filed for bankruptcy protection for the second time in seven years on Wednesday in the hopes it can reorganize its business and stave off liquidation. 

The mall-based boutique, long known for its ear piercing services and eclectic mix of jewelry and accessories, is staring down about $500 million in debt, rising competition and an evolving retail landscape that’s made it harder than ever to grow a business profitably. 

“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,” CEO Chris Cramer said in a news release. “We remain in active discussions with potential strategic and financial partners and are committed to completing our review of strategic alternatives.”

The company said stores will continue to operate as it looks to monetize its assets and continues a review of “strategic alternatives,” which could mean finding a buyer that’s willing to keep the business running.

In a court filing, Claire’s said its assets and liabilities are both between $1 billion and $10 billion and it’s explored a sale of its assets. Details around the events that led to its filing weren’t disclosed and are expected to be revealed in later court filings. 

Claire’s last filed for bankruptcy in 2018 for a similar reason: a steep debt load it was unable to maintain as sales declined and shopping moved online. During that restructuring, Claire’s was able to eliminate $1.9 billion in debt and keep stores operating with the help of $575 million in new capital. The restructuring handed control of the company over to its creditors, including Elliott Management Corp. and Monarch Alternative Capital. 

While Claire’s is still facing an untenable level of debt, it’s also grappling with new challenges. Tariffs are expected to impact its supply chain, and sleeker, savvier competitors have entered the market, such as Studs and Lovisa, the upstart ear piercing chains that have promised a safer, and cooler, approach to piercings. 

“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,” GlobalData managing director Neil Saunders said in a note. “Amazon and other online players have also turned the screw, especially as visits to some secondary malls where Claire’s is present have waned.”