The Canadian subsidiary of Claire’s, the U.S. jewelry and accessories retailer, has filed for creditor protection following its parent company’s bankruptcy filing in the U.S.
Claire’s, which reported significant net losses over the past year and deemed itself insolvent, is seeking “breathing space” under the Companies’ Creditors Arrangement Act to conduct a liquidation of some or all of its 120 stores in Canada while it searches for a buyer.
If no buyer emerges, the 64-year-old company — long popular among young girls, tweens and teens — will wind down operations for the benefit of all stakeholders.
“Claire’s has reluctantly concluded that there is not enough capital available to resuscitate the Canadian business to achieve profitability outside of a formal restructuring proceeding,” said Suzanne Stoddard, the senior vice-president and chief accounting officer of Claire’s, in a court document filed Wednesday.
Stoddard added that earlier efforts to sell all or part of Claire’s North American business have been unsuccessful.
The retailer, which operates 2,750 locations across 17 countries, filed for Chapter 11 bankruptcy protection in a federal court in Delaware on Wednesday. It had previously emerged from a bankruptcy filing in 2018 to eliminate a substantial portion of debt from its balance sheet.
The legal filing puts 703 Claire’s employees in Canada — including 133 full-time and 570 part-time workers as of June 30 — at risk of losing their jobs. Forty-five of its 120 retail locations are in Ontario, representing 40 per cent of its Canadian workforce.
None of Claire’s employees are unionized, and the company does not sponsor any pension plans.
According to the court document, Claire’s has faced strained liquidity over the past few years, as social distancing measures during the pandemic “eliminated” foot traffic to its retail stores, while customers increasingly shifted to e-commerce and away from shopping malls.
Recent tariffs imposed under U.S. President Donald Trump led to higher costs and uncertainty in inventory pricing, as Claire’s sourced about 70 per cent of its inventory from suppliers outside the U.S., including mainland China, Vietnam and Thailand, the document states.
Despite efforts to address these challenges — such as expanding its e-commerce platform in the U.S., growing its concession locations and raising more than $116 million in incremental liquidity — the company failed to achieve a turnaround.
Claire’s has delayed rent payments to all of its landlords for July and August, resulting in it being locked out of 16 retail stores in Canada.
