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Mall Stores Are Dying — Why Claire’s Says Its Bankruptcy Will Be Different

After months of speculation, teen mall staple Claire’s Stores Inc. today pulled the trigger, filing for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware.

The accessories store — known predominantly for its ear piercing business — joins an ever-growing list of teen mall favorites (Aeropostale, Bebe, BCBG, Wet Seal and Rue 21) that have taken their financial troubles to bankruptcy court in recent months.

For retailers clamoring to stay afloat, the list of challenges as well as the proposed resolutions have become all too familiar. The rapid rise of digital, the hard-to-match convenience and price offerings on Amazon and a general consumer shift toward experiential spending (versus buying products such as clothing, shoes and accessories) have shared the blame across the majority of retail Chapter 11 filings. Meanwhile, strategy for retailers has often involved pruning their store fleet, growing deeper in digital and a shuffling of leadership to reflect a greater omnichannel focus.

However, in court filings and a company release today, Claire’s sought to distinguish itself from peers that have taken the bankruptcy route, stating that it is “utilizing the Chapter 11 process to effectuate a balance sheet — not an operational — restructuring.”

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“Unlike other retailers that have come before it, Claire’s has commenced its restructuring process from a position of unique operational strength,” the retailer, which has been saddled with debt stemming from a private equity buyout in 2007, wrote in a release. “Claire’s is growing, not shrinking, its business — the company expects its concessions business to grow by more than 4,000 stores in 2018.”

Claire’s further noted that it “continues to be the world’s leading ear piercer,” having punctured 3.5 million in fiscal 2017 in the United States alone and another 100 million worldwide.

“The company’s iconic ear piercing services are unmatched and cannot be replicated online,” it added.

Despite its insistence that it’s in a unique position compared with other Chapter 11 filers, Claire’s is joining a string of retailers that have sought court-level relief following a debt-heavy private equity buyout — insiders suggest such heavy financial burdens have prevented many retailers from implementing the strategies needed to navigate the digital evolution. Toys ‘R’ Us last week announced plans to shutter U.S. operations after being crushed under the weight of an unworkable debt load. (Payless ShoeSource last year also fell victim to a hefty tabs and filed for bankruptcy but re-emerged in about four months.)

Claire’s said its bankruptcy would allow it to shed about $1.9 billion in debt and exit the legal process as a healthier company in September.

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