US retailer Claire’s filed for voluntary bankruptcy protection under Chapter 11 in Delaware on Monday, in a bid to reduce its $2.2 billion debt pile.

The move is part of plans to restructure the company’s debt by $1.9 billion US dollars (£1.3 billion), according to the court filing.

Claire’s has 1,000 stores in the US and is present in 34 countries, however the overseas operations are not part of the court filling.

Creditors have agreed to provide the company with a $575 million capital injection, and a $75 million asset-based lending facility.

With these commitments in place, Claire’s expects to complete the chapter 11 process in September 2018, and emerge with over $150 million of liquidity, according to the balance sheet outlined in the filing.

Ron Marshall, Claire’s chief executive, said:

This transaction substantially reduces the debt on our balance sheet and will enhance our efforts to provide the best possible experience for our customers.

We will complete this process as a healthier, more profitable company, which will position us to be an even stronger business partner for our suppliers, concessions partners, and franchisees.

Why it matters:

The rise of e-commerce has transformed brick-and-mortar retail on both sides of the Atlantic as 2018 has seen many companies struggle such as Toys R Us, which was the third biggest retail bankruptcy in the US.

Kate Omrod, lead analyst at GlobalData Retail, said the main reason for the company’s problems is lack of relevance and failure to move with the times: “The teens who used to shop at Claire’s have outgrown it, and it’s become slightly irrelevant. It just doesn’t have that cool factor that a lot of other retailers have, which will appeal to that teen market more.

“The in-store experience is also not up to snuff, as it’s crammed full of low-quality merchandise that can’t compete with the likes of trendy online fashion players such as ASOS and Boo Hoo”, she said.

Shoppers basically want a bit more now.

3 Things That Will Change the World Today

“If the product you sell is appealing enough, shoppers will come to you. Internet shopping has been a factor in their struggle, but I think it’s basically due to relevance in its product and issues with its own proposition,” she said.

Moving forwards, 2018 is set to see more high street closures as stores become more selective with their physical locations.

Omrod said: “That’s the way it’s heading for a lot of other retailers. I think you are going to see that [what New Look did] a lot more with other retailers, who just have too many stores. With the shift online you just don’t need that much of a physical presence.

“Obviously you need a physical presence, but retailers need to be a lot more thoughtful about their store portfolio.”

Background:

Founded in 1962, Claire’s has become a mainstay of teen shoppers, selling jewellery, accessories and piercing more than 100 million ears worldwide, according to the company.

The company is owned by US private equity firm Apollo Global Management, who bought the chain in 2007 for $3.1 billion.