Take Two: Formerly Troubled Retailers Seek Fresh Start With IPOs

In filing for an initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC), jewelry and accessory retailer Claire’s joins an exclusive club of companies that are looking to capitalize on the recent retail resurgence despite emerging from bankruptcy less than three years ago.

Last month, both Mattress Firm, which emerged from Chapter 11 protection in November 2018, and Guitar Center, which exited bankruptcy in December, filed confidential registration papers with the SEC, a potential sign that their businesses have regained their health in recent months — or that they’re ready to further reduce debt and invest heavily in operations.

Some 30 major retailers went bankrupt amid the pandemic in 2020, including Neiman Marcus, JCPenney, Brooks Brothers and Lord & Taylor. This year, at least 12 retail companies have filed for IPOs, including eight since July.

Related news: Mattress Firm Considers IPO at a Volatile Time for the Category

For Claire’s, which filed its paperwork with the SEC last week, going public may represent a new start for the company, which previously had been hobbled by debt from a private equity takeover and subsequently faced a fight between lenders over who would own the company post-bankruptcy.

But by its own admission, the company, which says Generation Z is its core demographic, may have an insufficient eCommerce operation, as the majority of its sales are made in stores or at concession areas located within other retailers.

“Many of our competitors have eCommerce businesses that are substantially larger and more developed than ours, which may place us at a competitive disadvantage,” Claire’s said in its regulatory filing.

PYMNTS research, conducted in collaboration with Carat from Fiserv, found that 96% of Gen Z shoppers buy retail items online, with 80% making more purchases online now than prior to March 2020.

Still, Claire’s notes in its prospectus that “a high proportion” of Gen Z spending is discretionary, given that many of those who are between five and 24 years old have their essential spending needs paid by parents or other family members. The retailer says this provides a “significant opportunity” to grow sales and create “another generation of loyal and enthusiastic Claire’s consumers.”

“Our vision is to remain an influencer and creator of youth and fashion culture and a leader in the fashion jewelry and accessories market,” Claire’s said in its SEC filing.

The Store Experience

Another thing that Guitar Center, Mattress Firm and Claire’s also have in common is the creation of in-store experiences to draw in customers with music lessons, product testing and ear piercings, respectively.

Claire’s, which has over 1,500 stores across North America, said that 20% of its revenue came from ear piercing-related transactions between the fiscal year 2019 and July 2021, with the retailer averaging approximately 100,000 piercings per week between May and July of this year.

As the in-store experience of having ears pierced cannot be replicated online and is often a memorable experience for young women, the retailer has two-thirds of its U.S. locations in shopping malls. Even so, despite rebounding slightly post-pandemic, the stores are seeing traffic continue to slide as shopping moves more online.

Also see: After Brief Mid-Summer Surge, Weak and Stagnant Malls Threatened by Fresh Headwinds

Claire’s said it has closed some of its least productive stores over the past two years and has identified over 500 potential locations for new stores. This year, the company expects to open 35 new standalone locations, the majority of which will not be at malls, and 180 new store-in-store locations at other retailers. The goal, Claire’s said in its SEC filing, is to have 40% of its stores located in non-mall locations, up 20% from 2019.

Claire’s is also focused on its new subscription box service, which launched last month with three different jewelry and accessories offerings for consumers. The retailer said it plans to expand the program in the future, though PYMNTS research shows that many consumers are looking to cut back on their subscriptions after months of adding on during the pandemic.

More details: Retailers Expand Subscription Options, But Consumers May Be at Their Limit

Claire’s may face some headwinds as it continues to grow, but with an almost entirely new executive team installed since 2019, the retailer is likely hoping the days of deep debt and bankruptcy are in the past.