Claire's faces an uphill battle to stay afloat
The last day of seventh grade ended at 11:56 a.m., and by 1 p.m., Paola Giron and her friends were at the mall, heading into Claire's.
"We come here all the time," said Giron, 13, wearing a T-shirt that said, "I woke up like this."
But after 20 minutes of searching, the group emerged with just one purchase among the five of them: An eye shadow palette that cost $3.99.
The 13-year-olds, who had already shopped at Forever 21 at the Fashion Centre at Pentagon City, were rationing their limited funds. And increasingly, that means Claire's - which this afternoon was running a 'Buy 3, get 3 free' promotion - is sidestepped for similarly priced (sometimes cheaper) wares at competitors like Forever 21 and H&M.
The accessories mainstay, awash in pink and purple, has long been a go-to for mall-roving preteens in search of charm bracelets ($7.99 for five), ombre glitter headbands ($5.99) and pom-pom topped pens ($4.99).
But after nearly six decades in American malls, Hoffman Esatates-based Claire's is facing an uphill battle to stay afloat. The retailer - which says it has pierced 94 million ears, more than any other company - has reported 11 consecutive quarters of declining sales and racked up more than $2 billion in debt, prompting speculation among analysts that it could be among the next to face big trouble. So far this year, more than 300 retailers have filed for bankruptcy, including mall staples BCBG Max Azria, Rue21, Wet Seal and the Limited. Others, including Macy's, Sears and Bebe have closed hundreds of stores.
"It's mass destruction at American malls, and Claire's is right in the middle of it," said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. "Claire's, which at one time was the most profitable chain in the business, has become a complete train wreck."
It's been a confluence of bad news for the the chain. Fewer Americans are going to malls these days, and those who do increasingly are shopping at fast-fashion chains like H&M, Forever 21 and Zara, all of which have boosted their accessories sections in recent years.
And although Claire's, which also owns the accessories brand Icing, has built up its website in recent years, analysts say online shopping is a tricky proposition for the company's young shoppers, many of whom don't have access to a credit card.
"Claire's - which is about impulse-driven purchases - has become a victim of changing mall traffic trends," said David Silverman, a retail analyst at Fitch Ratings, which recently deemed Claire's "at risk" of filing for bankruptcy. Claire's did not respond to a request for comment.
Adding to its woes is $2.17 billion in debt, much of it dating to 2007, when private-equity firm Apollo Global Management bought the company in a leveraged buyout valued at $3.1 billion. Claire's has struggled to pay back those debts, and in 2016, shuttered more than 150 stores in an effort to cut costs. Last spring, the company hired Ron Marshall, the former chief executive of now-defunct bookstore chain Borders, as its chief executive.
It hasn't always been that way for Claire's, Davidowitz said. For a long time, the Hoffman Estates-based business was hailed as a retail darling, with huge profits and a solid customer following.
"They were turning profits that were just unheard of," he said. "Add to that inventory that doesn't take a lot of space. Teeny space and big profits. It was a magical business."
But over time, much of that luster has faded. Last year, the chain's sales fell 6.5 percent to $1.3 billion.
Back at the mall in Arlington, Va., 8-year-old Katherine Masten had just finished window-shopping at Claire's.
"I think it's the first store I really, really liked," she said, adding that she'd been going there since she was 3. "I like that it has girlie stuff and stuff that I love." (Among those items: A neon bear-shaped phone case with a pom-pom tail for $12.99 that her mother wouldn't let her buy.)
But her older sister, Samantha, 14, says she's moved on: "I just felt like I got older but Claire's didn't," she said, adding that she now frequents H&M, Nordstrom and Pink, the Victoria's Secret spinoff targeted at teenagers.
Her mother, Karla Masten, shook her head in agreement.
"Claire's is amazing," she said. "Until a certain age."