Claire’s Stores is delaying $77 million in interest payments on its debt amid declining sales and worsening losses in the second quarter.
The Hoffman Estates-based teen accessories retailer, whose stores are mostly in malls, said in a regulatory filing that it’s taking advantage of a 30-day grace period on interest payments that were due Sept. 15.
Claire’s is also in challenging negotiations with a lender to try to refinance a credit facility, and that lender’s consent is needed for Claire’s to get cash “to fund its near-term debt service and other obligations.”
“The lender has declined to provide such consents,” Claire’s said.
Claire’s said, however, that it’s still paying workers and suppliers and is funding current operations.
The chain has been controlled by New York-based private equity firm Apollo Global Management since 2007. Claire’s acknowledged in its annual report that it’s “significantly” in debt. The “risk factors” mentioned in the report said that, if it defaults on its debt, it “could be forced into bankruptcy or liquidation.”
The announcement of put-off interest payments coincided with worsening financial results in the quarter.
Net sales were $317.2 million, down from $347.6 million in the same period a year ago, due partly to store closures. Net losses worsened to $32.1 million in the latest quarter, compared with a loss of $18.9 million in the same period a year ago.
Claire’s, whose operations also include the Icing chain, which is geared to young women, had 3,397 company-operated and franchise stores worldwide at the end of the quarter, down from 3,411 in the same period a year ago.
Sales at stores open at least a year fell 5.7 percent.
In North America, its stores are mostly in malls, a retail format that has been declining in popularity, partly due to the emergence of online shopping and competition from merchants who aren’t mall tenants.
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During an earnings call in May with analysts, the company said it was having “ongoing discussions” with landlords to try to reduce costs. “As you can imagine, we aren’t the only person standing at the door,” Chief Financial Officer J. Per Brodin said. “They’ve been productive conversations, but it just takes a long time to work through.”
Earlier this month, Claire’s announced that Scott Huckins would be its new chief financial officer. Huckins most recently served as corporate treasurer of Sears Holdings Corp.
Last month, Claire’s audit committee hired Grant Thornton as its new public accounting firm, effective immediately, and dismissed KPMG. Claire’s said it had put the work out for bid.
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