Claire’s Stores plans Chapter 11 bankruptcy

Claire’s Stores Inc. is preparing a Chapter 11 bankruptcy filing as the retailer of costume jewelry and ear-piercing services looks beyond malls for high-traffic store locations.

Filing a Chapter 11 bankruptcy would allow Claire’s to continue operating with protection from creditors while it tries to resolve its debt problems.

Claire’s is struggling to repay $2 billion of debt that Apollo Global Management LLC loaded onto the retailer’s balance sheet when Apollo completed a leveraged takeover of Claire’s in 2007.

An interest payment of $60 million is due Tuesday, and more than $1.4 billion of the $2 billion debt will mature next year.

Many of the Claire’s stores are in shopping malls, where the number of shoppers has declined due to competition from online retailers.

Claire’s has reached agreements with the CVS drugstore chain and supermarket operator Giant Eagle to put some of its outlets on the premises of the drugstores and supermarkets, where the number of potential customers may be greater than the number at shopping malls.

According to its website, Claire’s has locations at malls throughout South Florida including Aventura Mall, Dadeland Mall, Sawgrass Mills, the Coral Ridge Mall, Boynton Beach Mall and the Town Center at Boca Raton.

Hoffman Estates, Illinois-based Claire’s had its headquarters in South Florida before Apollo bought the retailer from the family of Rowland Schaefer in 2007 for $3.1 billion.

Claire’s now has more than 3,000 stores and says it ranks first worldwide in sales of ear-piercing services.

Greg Portell, lead partner of the retail practice at the A.T. Kearney consulting firm, told Bloomberg that Claire’s is capable of profitable operations but “they can’t service their debt.” [Bloomberg] – Mike Seemuth