Dive Brief:
- Teen retailer Claire's has filed for an initial public offering just shy of three years after it emerged from a Chapter 11 reorganization.
- The fashion and jewelry specialist has nearly doubled its sales year over year during the first half of 2021 and swung to a profit on its operations, after posting operating losses for the same period last year, according to its S-1 filing.
- Current owners Elliott Management and Monarch Alternative Capital, which took control of Claire's after its Chapter 11 reorganization, will still hold substantial interests in and control over Claire's after an IPO, the company said.
Dive Insight:
Claire's is the third retail Chapter 11 alumnus this month to file for IPO, along with Mattress Firm and Guitar Center, in another sign of the industry's broad-based turnaround this year and a positive shift in investor sentiment toward retail.
Claire's, known in part as the ear-piercing capital of the American mall — the chain said once it had pierced millions of ears over its life — filed for bankruptcy in March 2018. Like dozens of other retail chains to file for Chapter 11 in recent years, Claire's was hobbled by debt from a private equity takeover.
The retailer made a relatively successful trip through Chapter 11. Claire's lenders fought over who would get to own the company post-bankruptcy. In a way, that was a measure of the retailer's remaining value. For the company, it sure beats nobody wanting to own it at the end of the process, as was the case in the liquidations of numerous major retail chains in recent history.
Today Claire's operates nearly 1,400 stores in North America and another nearly 900 in Europe, and there are hundreds more franchised stores in the Middle East and South Africa. Additionally, the retailer runs nearly 200 locations under its Icing banner in North America.
The company also has 6.5 million loyalty members and recently launched subscription boxes of curated jewelry and accessories. By the end of the fiscal year, Claire's expects to invest more than $150 million in its business, including in its management team, retail footprint, new formats, e-commerce and omnichannel capabilities, and piercing experience.
Claire's still carries nearly $500 million in long-term debt, and another more than $400 million derivative liability that sits on the company's balance sheet. The company also has a history of net losses, some of which are due to derivative liability losses related to preferred company shares.
Claire's is entering a crowded field of IPOs, including more than 10 in retail so far this year. The industry has gotten a major boost from a booming stock market during much of 2021 as well as financial support from central banks. Just as important if not more so is the recovery in sales across much of the industry, driven by cash-flush and vaccinated consumers that have unleashed pent-up demand in the market.
