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Tween retailer Claire’s is facing legal challenges 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 the suppliers filed in Hong Kong.
The clash with vendors 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 stores out of bankruptcy for $140 million in September.
Since acquiring Claire’s, Ames Watson has been trying to rebuild what co-founder Lawrence Berger previously told CNBC is a “broken business.” Its bid to get the company back to profitability will hinge in part on a successful holiday season and its ability to stock popular merchandise moving forward.
The retailer’s sprawling supply chain, made up of longtime vendors equipped to handle 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’ve been a “nightmare,” said Marshall, who led the company from 2016 to 2019.
The dispute with suppliers adds another challenge for Ames Watson as it tries to fix the long struggling retailer. As the U.S. hits the final days of peak shopping, Ames Watson said “Claire’s has inventory in place for the holiday season.”
A clash over orders
Claire’s disputes with its suppliers in Asia surround 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 having financial difficulties.
Claire’s ordering volume for one supplier had dropped by 79% in March and 76% in April compared to the prior year, records reviewed by CNBC show. Then ordering ramped back up to the company’s regular cadence in May and June, with volume down only 2% and 3% in those months, respectively, compared to 2024, according to the records.
At the time Claire’s increased its orders again, the company was running out of 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.
While the vendors, including those who are now pursuing legal action against the retailer, were aware the company was navigating financial difficulties when the orders were placed, they expected to be paid as they had been during the retailer’s first bankruptcy filing, said the people, who spoke on the condition of anonymity because the discussions were private.
But by the time the vendors finished manufacturing the body jewelry, nail polish and friendship bracelets Claire’s had ordered ahead of the holiday shopping season, the retailer had filed for bankruptcy protection and the vendors weren’t paid for some orders, the people said.
When Ames Watson acquired the company, some of the vendors who were owed money agreed to keep working with Claire’s without getting paid for those debts, concerned they’d lose one of their largest clients and potentially their business, the people said. But others refused, and have taken legal action against Claire’s Hong Kong-based sourcing office RSI International, over millions in unpaid debts, according to claims the suppliers filed in the local court.
Meanwhile, about a week after Ames Watson announced it would acquire 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 a claim to recoup unpaid debts, after which transferors aren’t responsible for the obligations under Hong Kong Law.
In a statement to CNBC, Ames Watson didn’t comment on RSI International. It said it was “not involved in the operation or purchasing decisions made prior to the acquisition.”
“Since then, we have focused on responsibly stewarding the business and engaging suppliers in good faith as we strengthen Claire’s for the long term,” the company said. “We are excited about the company’s direction in 2026,” it added.
Hedge fund Elliott Management, which owned Claire’s at the time the orders were placed, declined to comment.
The holiday stakes
At the core of Ames Watson’s strategy to revive Claire’s is improving its merchandise, which could become more difficult if the company has strained relationships with some suppliers. Compounding the problem is President Donald Trump’s sweeping tariffs, which have already strained retail supply chains globally and raised costs for importers.
Marshall, Claire’s former CEO, said ensuring vendors in Asia got 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 where we had generational relationships and in many cases, represented 30, 40, 50% or even more of their total volume, and the intellectual capital that represented was core to the success of Claire’s,” Marshall said. “There’s a difference between having product on the shelves, which we could have done, and having the right product on the shelves.”
He said the disputes Claire’s is having with its suppliers could “disrupt the supply chain” both now and moving forward, making a turnaround more difficult.
“There needs to be fresh, novel product to lure [customers] into the store, and if you don’t have that continual replenishment of really exciting product, she’s gonna pass you by,” said Marshall. “This is literally the most fickle customer in the world: an 8-year-old girl.”
