Many thirty-somethings remember spending hours in shopping malls during their teenage years. One of the most common plans was to visit a Claire’s store, buy some rings, or get a piercing. Without a doubt, it is a brand that is part of the collective memory of a generation. Currently, Claire’s is at its worst moment. It has filed for Chapter 11 bankruptcy protection for the second time in a Delaware court. The brand is dealing with a list of difficulties that has led it to have a current debt of $496 million. They have found themselves obliged to stop paying interest and even the rents of their least profitable stores, as well as the closure of many of them.
The decline of physical retail, the trend of young people to shop online, the online competition posed by other brands, and tariff rates have created the perfect cocktail for Claire’s to be unable to sustain the situation. There are many youth retail brands that are on the list of American retailers that have gone bankrupt, such as Forever 21. There is no doubt that the culture of shopping malls is in decline, and that today’s youth are replacing their physical shopping with e-commerce.
Claire´s
Founded in 1961 by Rowland Schaefer, it began its journey under the name Fashion Tres Industries (FTI). It wasn’t until 1997 that it changed its name to Claire’s and began its journey in the U.S. market. In 2018, it declared bankruptcy for the first time. At that time, it had more than 4,500 stores around the world. Over the years, it has reduced the number to 2,750 in 17 different countries, including its Icing brand stores.
Is Claire’s in bankruptcy?
The answer is yes. U.S. media outlets have echoed their request for Chapter 11 bankruptcy protection before a federal court in Delaware. What does it consist of? While the company restructures its debt exploring possible solutions – including the possibility of a sale – the stores will remain open. Chris Cramer, the CEO of the company, told CNN, “The increase in competition, changes in consumer trends, and the gradual decline of retail – combined with our financial obligations – have made this move inevitable.” This is the second bankruptcy filing in less than a decade, which does not bode well for Claire’s.
What has led Claire’s to this situation?
By 2018, the company’s economic situation was delicate. Claire’s has faced a list of setbacks that have not allowed it to catch its breath. On one hand, the million-dollar debt they are facing amounts to $496 million. According to the debt analysis firm Debtwire, this has resulted in unpaid rents for its establishments, as well as the closure of those stores that were underperforming.
For his part, GlobalData analyst Neil Saunders explained, “Claire’s has faced a cocktail of internal and external challenges that have made it impossible to stay afloat”. On the other hand, Claire’s has not been exempt from the damage that the tariffs are causing. Its main suppliers are located in China and Cambodia, which means that the costs of imports are increasingly higher, further complicating its situation.
Fierce competition
One of the biggest mistakes the brand has made has been failing to adapt to the technological needs of young people. Nowadays, any company that does not offer its services also online is making a serious mistake, especially if its target audience is young people. Saunders explained, “The competition is much more in tune with what modern consumers want, and that leaves Claire out of the game”.
Young people have abandoned the culture of shopping malls and have internalized e-commerce as a method of shopping. This fact, along with the aforementioned, is what has caused Claire’s to find itself in its current situation. Unfortunately, from now on, Claire’s will be part of the list of North American companies that have gone bankrupt, like Forever 21, At Home, or Libertad Brands.