Teen retailer Claire Store’s is hoping to knock it out of the park for the upcoming back-to-school shopping season.A wave of bankruptcies and reorganizations have shaken up the retail industry, and there’s been plenty of speculation on which of the other major players may be in trouble. Unfortunately, there tends to be a domino like effect in some struggling industries, and others become more apt to explore options once the dust settles on the initial shock. One retailer is counting on a healthy sales bump from one of its busiest times of the year to insure survival.
According to the New York Post, teen retailer Claire Store’s is hoping to knock it out of the park for the upcoming back-to-school shopping season. Disappointing results could even lead the retailer on the road to financial reorganization.
“The situation depends on the real cash flow in the next couple of months. You have to think more likely than not it will result in bankruptcy,” a source told the Post.
Claire’s has over 3,000 locations worldwide and a presence in 95% of all US shopping malls, but is currently saddled with a substantial amount of debt that makes profitability a near impossibility. The accessory retailer is counting on strong sales from back-to-school shopping, which it counts as its second busiest time of the year behind the holiday shopping season.
The retailer was founded in 1961 and is headquartered in a suburb of Chicago. Apollo Global Management purchased the business in 2007, and the company’s debt level increased exponentially. All told, the company is on the hook for $2.4 billion with lenders, and $110 million in interest is coming due. For a company that projects only $72 million in profits for the six month stretch that ended June 30, that adds up to trouble.
“When I owned the company, it was a real gem,” said Marla Schaefer, former vice chair of Claire’s whose family founded the business.
Same-store sales have been declining, and are currently down about 5.9% in comparison to last year. The company has employed an aggressive discounting strategy to move merchandise, and are banking on back-to-school shoppers helping to stem the tide.
“This is still an emerging situation, and no one knows how it will turn out,” the source continued.