Charming Charlie shuffles management, will close stores

While Charming Charlie and other retailers are closing stores, see the companies that are doing the opposite in 2017. While Charming Charlie and other retailers are closing stores, see the companies that are doing the opposite in 2017. Photo: Michael Paulsen, Staff Photo: Michael Paulsen, Staff Image 1 of / 26 Caption Close Charming Charlie shuffles management, will close stores 1 / 26 Back to Gallery

Charming Charlie is overhauling its operations and management in an attempt to stem financial losses and restructure a heavy debt load during the critical holiday season.

The Houston-based accessories retailer announced this month plans to pare down its chain of about 375 stores by an unspecified number, cut jobs at its Houston headquarters and distribution center and shutter its Los Angeles office.

"By reducing the size and scale of our operations, we have the opportunity to stabilize the business," interim CEO Lana Krauter said in a statement. "We also will be better equipped to read and react to trends and what our customers want."

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The announcement marks a reversal for the colorful accessories retailer, which expanded at a breakneck pace under the leadership of Houston multimillionaire and entrepreneur Charlie Chanaratsopon. Founded in 2004, it opened nearly 280 stores by 2013 and added almost 100 since then.

Chanaratsopon, who could not be reached for comment, stepped down as CEO this fall, Charming Charlie spokesman Michael Freitag said Monday. He continues to serve as non-executive chairman of the board.

"He's still very much involved," Freitag said.

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Freitag declined to comment on whether Chanaratsopon remains the company's majority shareholder. At this time last year, he held a 60 percent equity stake while other investors, including private equity firm Hancock Park Associates, held the remainder.

Charming Charlie's initial success snagged Chanaratsopon a spot on the Forbes' list of America's Richest Entrepreneurs Under 40, which estimated his net worth last year at $450 million. By then, though, the company's performance had begun to falter in the face of challenges affecting the entire retail sector.

Credit analysts have for months sounded the alarm about the company's financial health and its ability to repay or restructure a $150 million loan set to mature in 2019. It also has a $55 million line of credit.

Standard & Poor's, in an October analysis, downgraded its rating on the company's debt, noting that its earnings will likely continue to slide. It cautioned that the company may have to restructure its debt to avoid a default as soon as next year.

Freitag said the balance sheet discussions are ongoing and declined to comment on the specifics of the negotiations.

The company has for months been challenged to bolster sales amid a ongoing shift in shopping preferences. Many of its stores operate in malls, which have been losing foot traffic as online sales surge and consumers seek more personalized shopping experiences.

On top of that, the company is still a relatively small player in the highly competitive world of jewelry and accessories sales. A Moody's Investors Service analysis last year noted that deep discounts, lighter foot traffic and poor product assortment had eroded its earnings.

Other accessories stores have felt a similar squeeze. Claire's, once a mall mainstay for ear piercings and inexpensive jewelry, has for months been closings stores to stem substantial losses.