Dive Brief:
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Teen accessories mall-based retailer Claire's Stores has begun negotiations with creditors about restructuring its debt, sources told Reuters.
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Losses have accumulated in the face of competition from e-commerce and slowing traffic to malls, with the company’s debt totaling $2.4 billion, Reuters reports.
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Private equity firm Apollo Global Management, which owns Claire's, has tapped law firm Morgan, Lewis & Bockius LLP to represent the retailer the negotiation, sources told Reuters.
Dive Insight:
Headwinds faced by teen apparel retailers American Eagle, Abercrombie & Fitch, and Aeropostale, which is under bankruptcy protection, seem to be also hitting accessories retailer Claire's.
But while American Eagle and Abercrombie have seemed to pull out of their troubles with large changes to their marketing, stores, and product quality, Claire's doesn't look like it's following suit.
The retailer saw same-store sales fall 5.1% in the first quarter, including a 0.8% decrease in the U.S. and a 12.7% decrease in Europe. First quarter net sales fell $20.3 million, or 6.4% year over year, to $299.6 million due to the closure of more than 150 stores this past year, the strong dollar, and decreased shipments to franchisees, the company said in May.
Apollo took Claire's private in 2007 in a leveraged buyout valued at some $3.1 billion, and earlier this year refinanced some debt to delay interest payments, Reuters said.
Credit rating agency Moody’s has steadily downgraded Claire’s since 2014, and earlier this year downgraded its outlook to negative in light of the company’s debt.
"Claire's continues to feel the ill-effects of declining mall traffic and an increasingly competitive landscape, with the result debt/EBITDA has risen to over 8 times. The new ratings further acknowledge the challenges faced by Claire's to grow earnings sufficient to support its presently unsustainable capital structure,” Moody's Vice President Charlie O’Shea said in a statement in April.
