South Korean supplier Sebang Chain, which has worked with Claire’s for more than three decades, has filed a lawsuit in Hong Kong’s High Court against two sourcing companies associated with the American firm, according to the South China Morning Post.
Sebang alleged that Clair’s has refused to pay overdue and pre-filing invoices. Some other creditors have already initiated legal proceedings, although the prospects of their claims remain uncertain.
People walk by a Claire’s store at the Northgate Mall on March 19, 2018 in San Rafael, California. Photo by Getty Images via AFP |
Their actions followed Claire’s decision in August to seek bankruptcy protection in the U.S. for the second time in seven years, as weaker consumer spending and a shift towards online shopping weighed on its business.
The jewelry and ear-piercing chain, which targets mostly female tweens and teens, had close to US$500 million in loans maturing by December 2026.
In September, Claire’s was acquired for $140 million by Ames Watson, a privately held investment firm known for reviving established brands.
Sebang reportedly was owed $1.5 million in overdue payments and held around $2 million worth of finished goods produced for Claire’s – roughly equivalent to three months of its revenue.
U.S. cosmetics supplier Pretty Woman has lodged a similar claim against Claire’s associated companies for $715,000 in outstanding receivables.
Suppliers are hoping that legal pressure will compel Claire’s Hong Kong agents and its new owner to resolve outstanding payments.
Responding to questions about the alleged $1.5 million in overdue payments, the new owner Ames Watson said that it was not involved in operational or purchasing decisions made before its acquisition of the retailer.
The firm added that it had been in discussions with suppliers to assess their willingness to continue working with Claire’s.
Not all creditors have been affected. “All is OK,” said Yair Hayman, a senior manager at Thailand-incorporated AMA Design International, whose Hong Kong unit appears on the creditor list. He did not disclose the size of the debt involved.
Founded in 1961, Claire’s grew into a familiar presence in shopping malls, known for its trendy jewelry and ear-piercing services aimed at young women and teenage girls. It has around 700 locations in the U.S.
However, changing consumer behavior in the social media era has challenged the business. Claire’s chief executive Chris Cramer attributed the company’s second bankruptcy to “the ongoing shift away from bricks-and-mortar retail” and intensifying competition.
At least nine other major retailers – including Party City, Z Gallerie, Forever 21 and Rite Aid – have filed for bankruptcy at least twice within the past 10 years, according to CNBC.
“What we’re typically seeing in the last year are these repeat filers is that they are just liquidating and closing down their stores, maybe with some online presence continuing,” said Sarah Foss, global head of legal at Debtwire.
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