Chris Ratcliffe | Bloomberg | Getty Images
Tween retailer Claire’s is facing legal action from some of its Asia-based suppliers over millions in unpaid debts as it tries to emerge from a second bankruptcy under new ownership, according to claims filed by suppliers in Hong Kong.
The conflict with sellers comes as private equity firm Ames Watson navigates its first holiday season as Claire’s new owner and works to ensure it has the right merchandise in stock after buying the mall retailer and about 1,000 of its bankrupt stores for $140 million in September.
Since acquiring Claire’s, Ames Watson has attempted to rebuild what co-founder Lawrence Berger previously told CNBC was a “broken company.” His bid to return the company to profitability will depend in part on a successful holiday season and his ability to stock popular merchandise in the future.
The retailer’s sprawling supply chain, made up of longtime suppliers equipped to meet the rigorous safety standards governing children’s products, has long been considered the company’s “secret sauce,” former Claire’s CEO Ron Marshall told CNBC. Without the support of those suppliers during its first bankruptcy in 2018, the retailer’s holiday season would have been a “nightmare,” said Marshall, who led the company from 2016 to 2019.
The conflict with suppliers adds another challenge for Ames Watson as it tries to turn around the long-struggling retailer. As the U.S. reaches the final days of peak shopping, Ames Watson said “Claire’s has inventory in place for the holiday season.”
A conflict over orders
Claire’s disputes with its suppliers in Asia relate to orders placed in the months before the retailer’s second bankruptcy filing in August, when it was still owned by hedge fund Elliott Management and experiencing financial difficulties.
Claire’s order volume for one supplier fell 79% in March and 76% in April from a year earlier, according to records reviewed by CNBC. Orders then returned to their usual pace in May and June, with volume down just 2% and 3% in those months, respectively, compared to 2024, records show.
By the time Claire’s increased its orders again, the company was strapped for cash, considering outright liquidation and looking for a buyer to save its business, according to a declaration Claire’s CEO Chris Cramer filed with the court after the company filed for bankruptcy.
Even though the sellers, including those now filing a lawsuit against the retailer, knew the company was going through financial difficulties when the orders were placed, they expected to be paid as they had been when the retailer first filed for bankruptcy, said the sources, who spoke on condition of anonymity because the discussions were private.
But by the time the sellers had finished making the body jewelry, nail polish and friendship bracelets that Claire’s had ordered before the holiday season, the retailer had filed for bankruptcy protection and the sellers were not being paid for some orders, the sources said.
When Ames Watson acquired the company, some of the salespeople who were owed money agreed to continue working with Claire’s without being paid for those debts, fearing they would lose one of their biggest customers and potentially their business, the sources said. But others refused and took legal action against RSI International, Claire’s Hong Kong-based sourcing office, for millions in unpaid debts, according to claims filed by suppliers in local court.
Meanwhile, about a week after Ames Watson announced it would buy Claire’s out of bankruptcy, RSI International filed a notice to transfer its assets to a new entity. The business transfer gave creditors 30 days to file an application for recovery of unpaid debts, after which the transferors are not liable for obligations under Hong Kong law.
In a statement to CNBC, Ames Watson did not comment on RSI International. It said it “was not involved in the transaction or purchasing decisions made prior to the acquisition.”
“Since then, we have focused on managing the business responsibly and engaging suppliers in good faith while strengthening Claire’s for the long term,” the company said. “We are excited about where the company is heading in 2026,” he adds.
Hedge fund Elliott Management, which owned Claire’s at the time the orders were placed, declined to comment.
The challenges of the holidays
At the heart of Ames Watson’s strategy to revive Claire’s is improving its products, which could become more difficult if the company has strained relationships with certain suppliers. The problem is compounded by drastic tariffs imposed by President Donald Trump, which have already strained retail supply chains globally and increased costs for importers.
Marshall, Claire’s former CEO, said ensuring suppliers in Asia were paid during the company’s first bankruptcy was key to having the right products in place for the holiday season that year.
“These were suppliers with whom we had generational relationships and, in many cases, represented 30, 40, 50 percent, or more, of their total volume, and the intellectual capital they represented was central to Claire’s success,” Marshall said. “There’s a difference between having a product on the shelves, which we could have done, and having the right product on the shelves.”
He said disputes Claire’s has with its suppliers could “disrupt the supply chain” both now and in the future, making recovery more difficult.
“You need a fresh and innovative product to attract [customers] “In the store, and if you don’t have that continuous replenishment of really exciting products, she’s going to pass you up,” Marshall said. “She’s literally the most fickle customer in the world: an 8-year-old girl.”
