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Tween retailer Claire’s is facing legal challenges from some of its Asia-based suppliers over millions of dollars in unpaid debts as it seeks to emerge from bankruptcy for a second time under new ownership, according to claims filed in Hong Kong.
The conflict with vendors comes as private equity firm Ames Watson navigates its first holiday season as Clare’s new owner and is working to ensure adequate inventory after acquiring the mall retailer and its nearly 1,000 stores out of bankruptcy in September for $140 million.
Since acquiring Claire’s, Ames Watson has been trying to turn around what co-founder Lawrence Berger previously told CNBC was a “broken business.” The company’s efforts to return to profitability will depend in part on the success of the holiday season and its ability to stock popular items going forward.
Former Claire’s CEO Ron Marshall told CNBC that the company’s vast supply chain, made up of long-standing vendors with the ability to meet the strict safety standards governing children’s products, had long been considered the company’s “secret sauce.” Marshall, who led the company from 2016 to 2019, said without the support of those suppliers during the company’s first bankruptcy in 2018, the retailer’s holiday season would have been a “nightmare.”
Disputes with suppliers add another challenge to Ames Watson, which is trying to turn around the long-troubled retailer. “At Claire’s, we’re stocking up for the holiday season,” Ames-Watson said as the U.S. enters the last day of peak shopping.
conflict over orders
Clare’s dispute with its Asian supplier is over orders placed in the months before the company filed for bankruptcy for the second time in August, when the company was still under the ownership of hedge fund Elliott Management and was in financial trouble.
According to records reviewed by CNBC, orders from one of Claire’s suppliers were down 79% in March and 76% in April compared to a year earlier. Orders then returned to the company’s normal pace in May and June, with records showing sales volumes in those months were down 2% and 3%, respectively, compared to 2024.
At the time Claire’s CEO Chris Kramer filed for bankruptcy, the company was low on cash, considering full liquidation and looking for a buyer to save the business, according to a filing in court after the company filed for bankruptcy.
Vendors, including those currently suing the retailer, knew the company was in trouble at the time of the order, but because negotiations were private, they expected to be paid the same way they were when the retailer first filed for bankruptcy, the people said.
But by the time the vendor finished making the body jewelry, nail polish and friendship bracelets ordered by Claire’s ahead of the holiday season, the retailer had filed for bankruptcy protection and the vendor had not been paid for some orders, the people said.
When Ames Watson acquired the company, some of its debt-laden vendors agreed to continue doing business with Claire’s without repaying their debts, fearing they would lose one of their biggest customers and, in some cases, business, the people said. But other suppliers refused and took legal action against Mr. Clare’s Hong Kong-based procurement firm, RSI International, for millions of dollars in unpaid debts, according to claims filed in district court by the suppliers.
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 transfer will give creditors 30 days to file claims to recover unpaid debts, after which time the transferor will no longer have any obligations under Hong Kong law.
In a statement to CNBC, Ames Watson did not comment on RSI International. The company said it was “not involved in the operations or purchasing decisions made prior to the acquisition.”
“Since then, we have focused on managing our business responsibly and engaging with suppliers in good faith to strengthen Claire’s in the long term,” the company said. “We are excited about the company’s direction in 2026,” he added.
Hedge fund Elliott Management, which owned Claire’s at the time of the order, declined to comment.
holiday stakes
A central part of Ames Watson’s strategy to turn Claire’s around is improving its products, which could be made more difficult if the company has strained relationships with some of its suppliers. Compounding the problem are President Donald Trump’s sweeping tariffs, which are already straining retail supply chains around the world and raising costs for importers.
Marshall, Clair’s former chief executive, said ensuring Asian vendors were paid during the company’s first bankruptcy was key to having the right product for the holiday season that year.
“These suppliers are people we have relationships with for generations, often representing 30, 40, 50% or more of our total volume, and their intellectual capital has been central to Claire’s success,” Marshall said. “We were able to get products on the shelves, but there’s a difference between being able to do that and having the right products on the shelves.”
He said the disputes Claire’s had with its suppliers were and could continue to “disrupt its supply chain” and make its turnaround even more difficult.
“You need fresh, novel products to bring[customers]into your store. If you don’t continually restock with really exciting products, your store will pass you by,” Marshall said. “This is literally the world’s most fickle customer: an 8-year-old girl.”
