Claire's files second bankruptcy petition in 7 years

by · UPI

Aug. 6 (UPI) -- Officials for retailer Claire's filed for bankruptcy protection on Wednesday as its operating costs rise while demand for its goods declines among its youthful customers.

A combination of tariffs on the mostly Chinese-produced goods sold by Claire's and inflation has cooled demand among its mostly youthful customers, according to NPR.

So has its distribution system of brick-and-mortar storefronts inside malls at a time when its traditionally youthful shoppers prefer buying goods online.

Illinois-based Claire's has a $500 million loan due for payment next year, but its declining revenues and profits endanger its stores in the United States and Canada.

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"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," Claire's Chief Executive Officer Chris Cramer said in a prepared statement.

Claire's counterpart in Canada likely will file for bankruptcy protection there, but the retailer's North American stores will remain open.

"We remain in active discussions with potential strategic and financial partners and are committed to completing our review of strategic alternatives," Cramer said.

Claire's filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for Delaware.

The retailer is noted for its low-cost fashion accessories, jewelry and piercing services. In 2018, the company filed for bankruptcy protection.

Elliott Management Corp. and Monarch Alternative Capital now control Claire's, which wiped out $1.9 billion in debt and kept its retail outlets open after securing a $575 million loan, according to CNBC.

The retailer cited between $1 billion and $10 billion in assets and liabilities alike in Wednesday's bankruptcy filing.

Tariffs on Chinese-made goods could affect Claire's supply chain, and increased competition from ear-piercing service providers is affecting Claire's business among its younger customers.

"Competition has ... become sharper and more intense over recent years," GlobalData managing director Neil Saunders recently said.

"Retailers like Lovisa [are] offering younger shoppers a more sophisticated assortment at value prices," Saunders said.

"This is more attuned to what younger consumers want and has left Claire's looking somewhat out of step with modern demand," he added.

Amazon and other online retailers also are negatively affecting Claire's business model, according to Saunders.