Claire’s Stores jewelry chain files for Chapter 11 bankruptcy

Shopping mall jewelry chain Claire’s Stores has filed for Chapter 11 bankruptcy, hoping to escape massive debts preventing the business from shining in a grim retail environment.

Claire’s is another victim of a series of private equity buyouts orchestrated by outside investors who got into debt a decade ago, forcing retailers to pay heavy.

Among the others was Toys R Us, which last week gave up fighting to restructure its operations and decided to liquidate all of its U.S. stores, barring a last-minute chance to keep the top 200 locations open.

Struggling malls, online competition and nimble physical competitors have also proven to be problematic.

Claire’s said it has secured the backing of its major secured lenders for a comprehensive debt reduction campaign, including hedge funds Elliott Management and Monarch Alternative Capital.

The retailer, known for its appeal to teenagers and having pierced more than 100 million ears worldwide, said he was “confident” he would survive the bankruptcy filed in Delaware. The company also operates the Icing brand.

Claire’s has said she will use legal process to get rid of around $ 1.9 billion in debt and reappear as a healthier business in September, ready for a strong holiday shopping season.

The retailer, which sells products at more than 7,500 locations in 45 countries and employs around 17,000 people, has not reported any plans to close stores. The company’s more than 5,300 sites are located in the United States, many of which represent dedicated floor space with other retailers.

The company has stores in about 99% of US malls, according to a court record.

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“This transaction significantly reduces the debt on our balance sheet and will strengthen our efforts to provide the best possible experience for our customers,” Claire’s CEO Ron Marshall said in a statement. “We will complete this process as a healthier, more profitable business, which will position us to be an even stronger business partner for our suppliers, franchise partners and franchisees.”

The fact that the company was profitable in 2017 – it reported a net profit of $ 29 million – follows a trend by retailers to use bankruptcy to restructure before it’s too late.

Several retailers have recently filed for bankruptcy while remaining fundamentally profitable.

But Claire’s still faces challenges. Claire’s revenue grew from $ 1.5 billion in her fiscal 2014 to $ 1.3 billion in 2017.

Investment firm Apollo Global Management, which orchestrated the initial buyout plan, owns 97% of Claire’s, according to a court file.

In 2016, Claire’s tried a debt reduction plan and leadership reshuffle involving a new CEO, a new CFO, a new director of merchandising, and a new executive vice president.

The company has since cut costs in an attempt to right the ship, CFO Scott Huckins said in a court filing.

Founded in 1961 by Rowland Schaefer, the retailer started out as a wig seller under the name Fashion Tress Industries. This company acquired the 25-store jewelry chain Claire’s Boutiques in 1973, then changed its name to Claire’s Stores.

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Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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