Founded: 1961
NAIC: 448150 Clothing Accessories Stores; 453998 Miscellaneous Retail Stores
SIC: 5632 Women's Accessory & Specialty Stores; 5699 Miscellaneous Apparel & Accessory Stores; 5999 Miscellaneous Retail Stores Nec
A fixture in malls for more than three decades, Claire's Stores, Inc., and its subsidiaries lead the fashion accessory industry with over 3,000 stores in the United States, Canada, England, Japan, Puerto Rico, Scotland, and Wales. The company's perennially popular women's accessories, representing the company's primary product line, are marketed toward women in the 13 to 40 age range. Founder Rowland Schaefer grew the company from a modest success in the 1980s through shrewd acquisitions and calculated growth to become a world leader in women's accessories for the 21st century. After thirty years in the Schaefer family, Claire's Stores was sold to Apollo Management in 2007, marking a new era for the chain, which has continued to expand through franchise development into new international markets.
From Wigs to Accessories
What became the Claire's Stores, Inc., of today emerged from two entirely separate companies. Schaefer formed a company named Fashion Tress Industries (FTI) in 1961 to service the increasingly popular wig marketplace in the South. FTI's quality hairpieces were a success with women of the early 1960s, and the company eventually became the world's largest retailer of fashion wigs. Meanwhile, in the Midwest, a small chain of retail outlets named Claire's Boutiques began selling a wide range of accessories from necklaces and earrings to evening bags and pins. Catering to women and teenaged girls, Claire's Boutiques had tapped a rare market niche--when times were tough and people had little to spend, women and teenaged girls could purchase a few trinkets and accessories to make an old outfit seem brand new. In plush times, these same consumers continued to enhance their wardrobes by purchasing accessories for both old and new outfits.
By the beginning of the 1970s America's fashion trends were changing and women began to turn away from wigs and to concentrate on their own tresses instead. As demand for wigs waned, Schaefer looked into diversification and found it in Claire's Boutiques. Based in Chicago with 25 retail outlets, Claire's was still a relatively young enterprise, yet with tremendous growth potential. Schaefer bought the midwestern chain and changed his company name from FTI to Claire's Stores, Inc., in 1973. The transition from wigs to accessories proved relatively smooth, and despite some rough times in the early 1980s, was a success. Yet few imagined just how successful Claire's Stores would become in the next decade and a half.
Accessorize, Accessorize, Accessorize
By fiscal 1985 (the company's fiscal year ended with the Saturday closest to January 31) sales for the Claire's chain reached $55.9 million with net income of $6.6 million. The following year, sales climbed to $74.5 million, income to $7.5 million, and stock traded as high as $15 on the New York Stock Exchange. Although sales continued to climb for fiscal 1987 to $87.2 million, net income fell to $5.3 million, an indicator of difficulties to come. From sales alone, Claire's appeared to be on the move, when fiscal 1988 brought in $103.4 million in sales, and income was back in the black to $6.2 million. Even Claire's Stores' stock held steady at $13, until fiscal 1989 when it plummeted to $2 despite strong sales of $127.3 million and income of $7.1 million.
During fiscal 1989 Claire's ambitious expansion plans took their toll on sales after a burst of openings and the acquisition of the Japanese chain Topkapi with 16 stores, bringing total stores to 580. Same-store sales and earnings floundered in red ink during the spring of 1988. Yet Schaefer, aware of the too-aggressive expansion and a temporary loss of control over his ever-growing empire, tightened the reins and initiated a turnaround by the last two quarters of 1988, with Claire's Stores' stock regaining some of its luster, trading at $7 by the end of the fiscal year.
Contributing to the company's turnaround was the implementation of a $5 million chainwide state-of-the-art computerized cash register and inventory system that linked Claire's stores with headquarters. Daily data capture rose to 99 percent as opposed to 70 percent when performed manually by the Claire's staff. The computer system and the hiring of Claire's Stores' first director of loss prevention further improved the company's numbers by reducing "shrinkage" or theft of the thousands of small items available in each store, with the company keeping this figure to 10 percent or less (the figure for 1986 was as high as 12 percent of sales). Lastly, an increase in Asian imports accelerated gross earnings, and new management selected by Schaefer completely stopped the company's hemorrhaging before any long-lasting or irreparable damage was done.
By May 1989, three months after the end of the previous fiscal year, Claire's posted an incredible sales surge of nearly 79 percent, with same-store increases of 58 percent. Although the company continued expanding, it did so carefully, and by July had 650 outlets in 47 states with some 4,000 employees, nearly two-thirds of whom worked part-time. Claire's finished the year (fiscal 1990) with $190.2 million and a very healthy $19.5 million in net income.
Staying Ahead of Competitors and Thriving
Sales for fiscal 1991 increased 35 percent to $255.2 million, and income was up to $20.5 million, partially due to a 7 percent rise in same-store sales. The company's stock was up again, too--trading at about $14--almost as high as 1985's all-time high of $15. Claire's hoped to add between 125 and 150 new stores by the end of the fiscal year and had revitalized its ordering system to facilitate keeping a better tab on trends and delivering merchandise to its stores in far less time. By the spring of 1992 there were a total of 1,006 company-owned stores in 47 states; of these 721 were Claire's, 113 were Topkapi, 32 Dara Michelle, 32 Arcadia, 20 Art Explosion, and another 90 were under the name Art Works or Picture Show. The latter four chains were a departure from Claire's Stores' general trade in women's and girls' accessories. Arcadia and Art Explosion stores were considered "trend" gifts shops stocking calendars, mugs, T-shirts, seasonal and stationery items, unframed posters, and other quick-sale products with a price range from $1 to $75 and an average sale of between $5 and $10. Art Works and Picture Show outlets carried graphic arts, such as framed posters and many other types of matted and framed artwork.
The end of the year, however, brought a vast turnaround as fiscal 1992 sales fell to $234.2 million, and Claire's suffered its first loss since 1981. Led by a same-store sales drop of 11 percent, the stunning loss of $8.7 million was blamed on several factors, including too-rapid expansion again (such as ill-fated stores in outlet malls which proved redundant), markdowns on excessive Christmas and Easter inventories which in turn compounded the problem by tying up space and keeping new merchandise from the shelves and racks, the discontinuation and disposal of the costly graphic arts line of stores (Art Works and Picture Show) for a sizable hit of nearly $12 million, and lastly, the cost of increased security as Claire's introduced cameras and locked display cases to lower theft rates.
While the company made adjustments to shore up losses and promote sales, Schaefer also looked into diversification. One option was a mail-order sideline with slightly higher-priced items; another was to duplicate the successful $130,000-prototype store that Claire's had opened in the Pembroke Pines Mall near headquarters, filled with black marble, mirrors, plenty of bright neon, mannequins, and several upscale items like earrings with a price tag of up to $50. Despite its difficulties in the early 1990s, Claire's was still considered a cash cow with some $22 million in cash in fiscal 1992.
Additionally, Schaefer, who at 76 had long passed the traditional age for retirement, sporadically talked about leaving the company or finding a buyer for his 41 percent share of Claire's Stores, Inc. If those on Wall Street were concerned, few showed it, for Schaefer was well liked and respected throughout the industry, and most knew he would never leave his company unstable. Fiscal 1993 brought good news as sales rose to $248 million, and income was back in good form at $14.5 million. By July total stores grew to 1,060, up from 1,040 the previous year, in 48 states.
Fiscal 1994 proved another successful year for Claire's with $281.7 million in sales and income of 7.9 percent or $23.6 million. Costume jewelry, generally Claire's Stores' biggest selling item, dominated the company's bottom line once again by accounting for $180.3 million or 64 percent of total sales. The same rang true in fiscal 1995 when costume jewelry sales reached $196.1 million of the year's $301.4 million total sales with income at 9 percent or $23.9 million. 1995's fiscal figures once again brought a red flag as same-store sales decreased 2 percent due to what the company deemed as the lack of a discernible "significant" fashion trend.
Near the end of fiscal year 1995, the company bought a $7.4 million new distribution facility in Hoffman Estates, Illinois, a suburb of Chicago. Claire's Stores' other distribution facility, originally leased in 1985 and located in Wood Dale (another Chicago suburb) continued to service the company's merchandising needs, with up to five shipments weekly to individual stores with the exception of imported goods like tote bags and costume jewelry, until the new facility was ready in June 1996.
New Acquisitions and International Expansion
In January 1996, just prior to the end of the company's fiscal year on February 3, a three-for-two stock split was declared by the board of directors in the form of a 50 percent stock dividend distribution (9.9 million shares of common stock and 653,807 shares of Class A common stock were given to stockholders of record). Also in January the company moved forward with the first of three major acquisitions, two in the United States and another in the United Kingdom. The first of the U.S. purchases (which counted towards fiscal 1996) involved assets from The Icing, Inc., which had filed for Chapter 7 protection. Assets included 85 property leases in prime locations, retail equipment, fixtures, and furniture.
After remodeling, Claire's planned to reopen the stores by May as either "Claire's Accessories" if no other Claire's store existed in the mall or as a refurbished "The Icing" if there was a Claire's store already in operation. The second acquisition was a British fashion chain known as Bow Bangles plc. Purchased assets included 48 stores throughout England, Scotland, and Wales, as well as related fixtures, furniture, and equipment. Lastly, in April 1996 (fiscal 1997), the company acquired a third chain, Accessory Place, Inc., taking over 31 stores. This brought Claire's Stores' total number of outlets worldwide to over 1,500, with plans to open another 150 locations before fiscal 1997 ended--between 15 and 20 in Canada, 110 to 115 in the United States, and 30 more in Japan. Of the 1,500 stores, 142 were Claire's Accessories stores with each averaging 919 square feet in enclosed and "open-air" malls.
For a start-up cost of about $95,000, using specially-designed display systems, each Claire's Accessories store was ready for business within three months, a relatively short time in the retail industry, and well-stocked in women's and some unisex fashion accessories (usually in excess of 6,000 pieces of merchandise) such as costume jewelry (bracelets, earrings, hair ornaments, necklaces, pins, etc.), purses, sunglasses, tote bags, some trend gifts, and ear-piercing for a small fee. The other company-owned outlets under the names Bow Bangles, Dara Michelle (the more upscale outlet, with items priced from $5 to $75), The Icing, and Topkapi often operated within the same malls as Claire's Accessories stores. This clustering of stores in successfully tested geographical areas kept administrative supervision costs to a minimum and made it easier for refurbishing stores, which the company did on a regular basis.
Although the first quarter of fiscal 1996 found same-store sales lagging, a turnaround began in April and continued. By the third quarter (in October 1995), Schaefer and the company's management were jubilant over record sales and earnings. Stating that the year had proved to be "everything we expected it to be," Schaefer further explained that customer traffic was "excellent," average sales were higher, promotional costs were under budget, and markdowns had been unnecessary. Claire's Stores' finished fiscal 1996 with $344.9 million in sales, an increase of 14 percent over the previous year, and income of $30.9 million, including a rebound in same-store sales to 3 percent instead of 1995's decrease. Costume jewelry sales remained strong at $244.9 million for about 71 percent of sales, 6 percent over 1995 and 7 percent over 1994.
In 1998, Claire's Stores entered the men's clothing market, after purchasing Lux Corp., and its retail chain "Mr. Rags," for a reported price of $43 million. Claire's acquired 56 retail locations in the purchase and expanded the chain to 75 stores by the end of the year. In November, Claire's acquired 53 stores from Bijoux One, a privately held fashion chain headquartered in Zürich, Switzerland. By the end of the 1998 fiscal year, Claire's Stores had opened 48 stores and had expanded by over 170 stores in less than three years.
Near the end of 1999, Claire's Stores acquired rival clothing company Afterthoughts from the New York-based Venator Group (formerly Woolworth's, Inc.) for a reported $250 million. The purchase was the largest in Claire's Stores' history as the company acquired 768 retail stores and dramatically increased its customer and retail base. At the end of the fiscal year, Claire's Stores reported ownership of 2,027 stores in eight countries and the company was in preparations for further expansion in Europe and through subsidiaries in Asia. Marty Nealon, the former head of Afterthoughts for the Venator Group, was hired by Claire's and in December 1999 was named head of Claire's North America operations.
Claire's Stores in the 21st Century
By the end of the first financial quarter of 2000, Claire's Stores reported record growth for the eighth consecutive year in the company's history. The company continued its aggressive growth program with the acquisition of the French retail chain Cleopatre in February 2000, for a reported price of $11 million. Claire's gained 42 retail locations and a foothold in the French market. In September 2000, Claire's press department released information that Marty Nealon, the chief operating officer for the chain, had been released from the company and that Rowland Schaefer was assuming Nealon's duties until a replacement could be found.
According to company press statements, Claire's suffered during the first half of 2000 from difficulties in integrating the more than 700 retail locations acquired in the 1999 purchase of Afterthoughts. In addition, Claire's Stores suffered from an overall decline in same-store sales, although retail dividends remained steady. Sales began increasing in the 2003 fiscal year, with an 11 percent increase reported by November 2002. In May 2002, Claire's Stores announced that the company had decided to divest itself of its 154-store Mr. Rags division, which was based in Long Beach, California. A private investment company, headed by Ivan Spiers and Bruce Friedman, arranged to purchase controlling shares of the company and control of the retail outlets.
In November 2002, Rowland Schaefer suffered a mild stroke and took a leave of absence from his position as CEO of the company while his daughters Marla and Bonnie Schaefer, who served as board vice-chairpersons, took temporary control of their father's executive functions. In November 2003, the company announced that Rowland Schaefer would not return to his former positions and would be granted the position of chairman emeritus, en route to retirement, while his daughters Marla and Bonnie were elected by the board to serve as co-chairs and co-CEOs for the company. In the official press statement, Schaeffer stated, "For some time now, I have been thinking about passing the baton to Bonnie and Marla. Claire's Stores has delivered significant growth during the past year under their leadership, fully confirming my confidence in them." The board also released statements confirming the acceptance of a retirement package for Rowland Schaeffer valued at between $8 and $11 million.
At the close of the 2004 fiscal year, the company announced an increase in income of over 36 percent and a 13 percent increase in sales from the previous fiscal year. By the end of the year, Claire's Stores operated 2,810 retail locations in the United States, the Caribbean, Puerto Rico, Canada, the United Kingdom, Ireland, Switzerland, Austria, Germany, and France. In addition, the company maintained a 50 percent share in a joint venture with Aeon Corp., in its Claire Nippon line, which managed 150 stores in Japan.
Claire's Stores continued with European expansion in 2005, opening new stores in Spain and Holland. In contrast to previous expansion efforts, the company opted to open new stores without purchasing previously existing chains. Taking their expansion into account, Claire's Stores' sales increased by 7 percent in 2005 from 1.28 to 1.37 billion, with an additional 6-7 percent growth expected for 2006. In addition, the company conducted a buy back of approximately 215,000 shares of their common stock at a cost of over $6.5 million. In 2006, Claire's Stores entered into a franchising agreement with Al Shaya Co. to license 87 stores in the Middle East and Turkey. In addition, Claire's entered into an agreement to open franchises in South Africa under a partnership with the House of Busby Limited.
In March 2007, after several months of negotiations, Claire's Stores finalized an agreement to sell the company to Apollo Management L.P., a New York-based private equity company. The final price was negotiated at approximately $33 per share or a total of $3.1 billion. In a joint press release, Co-CEOs Bonnie and Marla Schaefer said of the sale, "The decision to sell the company that our father founded was reached after an enormous amount of soul searching over time and brings our strategic review to a successful conclusion. After reviewing the final bids, our Board of Directors unanimously concluded, after in-depth consideration, that this transaction with Apollo is in the best interests of our shareholders." The merger was formally approved by a majority vote among the shareholders in May 2007.
As Claire's Stores prepared for the 2008 calendar year, the company continued its record of sales growth and expansion. As of September 2007, the company owned 3,022 retail stores, half interest in 203 stores under the Claire Nippon division, and 153 franchises in the Middle East, Turkey, South Africa, Russia, and Poland. While the Schaefer family accepted a controlling buyout as part of the 2007 merger, many in the senior staff remained with the company, including Chief Financial Officer Ira D. Kaplan who was promoted to senior vice-president, while Eugene S. Kahn, of Apollo Management L.P., took the executive reins as chairman and CEO. With a history of growth and new leadership under an established corporate structure, Claire's Stores seemed prepared to head into a new decade as a leader in the retail market.
Principal Subsidiaries
CBI Distributing Corporation; Claire's Accessories U.K. Ltd.; Claire's Boutiques, Inc.; Claire's Canada Corp.; Claire's Nippon Co. Ltd. (50%); Claire's Puerto Rico Corp.; Afterthoughts, Inc.; Cleopatre, Inc.
Principal Competitors
Wet Seal, Inc.; Tween Brands, Inc.; Forever 21, Inc.
Further Reading
"Claire's Stores, Inc.," South Florida Business Journal, July 10, 1989, p. 21.
"Claire's Stores, Inc.," South Florida Business Journal, October 28, 1991, p. 18.
"Claire's Stores, Inc.," South Florida Business Journal, June 25, 1993, p. 25A.
Coletti, Richard J., "Claire's Renews Its Glitter," Florida Trend, February 1993, pp. 26-28.
Collins, Lisa, "Cheap and Cheerful Strategy Fuels Claire's Explosive Growth," Crain's Chicago Business, February 18, 1991, p. 16.
"Company News: Claire's Stores to Buy Rival Chain Afterthoughts," New York Times, November 3, 1999.
Forseter, Murray, "Shedding Light on Claire's Recovery," Chain Store Age Executive, July 1989, p. 6.
Marcial, Gene G., "A Costume Jeweler Regains Its Sparkle," Business Week, February 13, 1989, p. 88.
"Tempting Takeover Morsels That Could Gain 38%-Plus," Money, September 1994, p. 62.
— Taryn Benbow-Pfalzgraf; Updated by Micah L. Issitt
