Keepsakes for kids might last forever. But for outlets stocking them, not so much. Jewelry retail chain Claire's Stores filed for bankruptcy protection in Delaware on Monday, citing mounting debt as a motive for its Chapter 11 decision.
Despite reporting a 2017 profit of $29 million, the chain could join a legion of big box stores that went belly-up of late, including Toys R Us, Payless Shoestores, and Radio Shack, which were unable to leverage bankruptcy to keep operating.
Hoping for a more sparkling finish, though, Claire's announced it was restructuring to dump nearly $2 billion worth of debt so it can be leaner and meaner in time for the fourth quarter of the year, traditionally retail's strongest season. So far, there are no intentions to close any of Claire's chain of more than 7,500 outlets in 45 countries.
Much of the debt started accumulating back in 2007 when Claire's was bought out by private equity company Apollo Global Management LLC for $3.1 billion. But the company claims it's garnered finances from hedge fund firms Elliott Management and Monarch Alternative Capital for a strategy to eliminate that debt.
The plight of Claire's, which targets its wares and provides piercing services to the teen market, is part of a trend that has retailers fighting for their lives. Thanks to the rise of Amazon — whose CEO Jeff Bezos was declared the world's richest man by Forbes magazine earlier this year — and other e-commerce businesses, more consumers are staying at home to shop instead. That's left retailers, who benefit most from servicing customers in person, scrambling for a toehold to compete.
More retailers closed shop in 2017, a record year for company shut-downs, eclipsing similar activity during the Great Depression of the 1930s. And 2018 could get even worse, according to S&P Global Ratings, an agency that assesses business credit ratings. In a recent report, S&P determined that while some retail companies have adjusted to an environment that favors Internet shopping over its more physical counterpart, the agency believed that there are still far too many retail stores in America.
Another report that called 2017 the dawning of the "retail apocalypse" said that nearly 7,000 retailers could shut down operations this year.