8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 11, 2008

CLAIRE’S STORES, INC.

(Exact name of registrant as specified in its charter)

Florida
(State or other jurisdiction of incorporation)

333-148108
(Commission File Number) 59-0940416
(IRS Employer Identification Number)

3 S.W. 129^th Avenue, Pembroke Pines, Florida 33027
(Address of principal executive offices)

Registrant’s telephone number, including area code: (954) 433-3900

Not applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item 2.02. Results of Operations and Financial Condition
Item 9.01. Financial Statements and Exhibits
	SIGNATURES
EX-99.1 Press Release dated September 11, 2008

Item 2.02. Results of Operations and Financial Condition.

     On September 11, 2008, Claire’s Stores, Inc. (the “Company”) issued a press release announcing results for the second quarter of fiscal 2008, and certain other information. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein.

     The information in this Form 8-K and the Exhibit attached hereto shall be deemed “furnished” and not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any Company filing under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(a)	Financial Statements of Business Acquired.
	Not applicable
(b)	Pro Forma Financial Information.
	Not applicable
(c)	Exhibits.
	Exhibit 99.1—Claire’s Stores, Inc. Press Release dated September 11, 2008

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CLAIRE’S STORES, INC.
Date: September 12, 2008	By:	/s/ J. Per Brodin
		J. Per Brodin
		Chief Financial Officer

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EX-99.1

Exhibit 99.1

NEWS BULLETIN RE: CLAIRE’S STORES, INC.

3 S.W. 129th AVENUE, PEMBROKE PINES, FLORIDA 33027 (954) 433-3900

CLAIRE’S STORES, INC. REPORTS FISCAL 2008
SECOND QUARTER RESULTS

PEMBROKE PINES, Florida, September 11, 2008. Claire’s Stores, Inc., a leading specialty retailer offering value-priced jewelry and accessories, today reported its financial results for the 2008 second quarter ending August 2, 2008. Effective with the fiscal quarter ended May 3, 2008, the Company has changed its fiscal year naming convention to coincide with the calendar year in which the fiscal year begins. Accordingly, the current fiscal quarter is referred to as the 2008 second quarter and the comparable prior year quarter is referred to as the 2007 second quarter.

Second Quarter Results
The Company reported net sales of $360.0 million for the 2008 second quarter, a 1.5% decrease from the 2007 second quarter. The decrease was primarily attributable to a decline in same store sales, partially offset by the growth in our new store base and the effect of foreign currency translation.

Consolidated same store sales declined 5.8% in the 2008 second quarter. A decline in average transactions per store of 12.0%, was partially offset by a 7.5% increase in average sales per transaction. The increase in sales per transaction reflects our strategy to increase average ticket through good, better and best price tiering. The decline in the number of transactions reflects both weaker mall traffic and less reliance on low margin, low dollar value promotional transactions. In North America, same store sales decreased 8.1%, with sales at our Claire’s stores declining less than at our Icing stores. European same store sales declined 1.7%. We compute same store sales on a local currency basis, which eliminates any impact from changes in foreign exchange rates.

Chief Executive Officer Gene Kahn said, “In the second quarter, we saw an improvement in the tone of business as our comparable store sales improved during each month of the quarter and our merchandise margin increased. We also successfully completed phase one of our Pan-European Transformation (“PET”) project. As a result, we now have an integrated team managing our European business, and a more focused North American merchandising team, within which there are now dedicated groups responsible for each of our Claire’s and Icing brands. We launched our Cost Savings Initiative (“CSI”) during the quarter and are on target to achieve our previously announced goals of $15 million of expense reductions this year and an annualized amount in excess of $40 million.

I would also like to note, in the 14 months since the transaction was completed, we have made significant progress in upgrading our management team and refining our organizational structure, creating a strong foundation to sustain us through this difficult retail environment and positioning us to reach our performance goals.”

The gross profit percentage was flat at 49.9% for both 2008 and 2007 second quarters. A 290 basis point increase in the merchandise margin was offset by an equal increase in occupancy and buying costs. Excluding $1.4 million of non-recurring costs related to the PET project, gross profit percentage increased to 50.3%.

Selling, general and administrative expenses increased 7.2% to $132.4 million in the second quarter of Fiscal 2008 compared to $123.5 million in last year’s comparable fiscal quarter. Adjusting for changes in foreign exchange rates and excluding $2.0 million of non-recurring PET costs, $1.7 million of expense relating to CSI, and $0.3 million of additional sponsor management fees this fiscal quarter compared to the 2007 second quarter, SG&A increased $0.9 million or 0.7%.

Adjusted EBITDA in the 2008 second quarter was $58.1 million compared to $64.3 million in the 2007 second quarter. The Company defines Adjusted EBITDA as earnings before interest, income taxes, depreciation and amortization, excluding the impact of transaction related costs incurred in connection with its May 2007 acquisition and other non-recurring or non-cash expenses, and normalizing occupancy costs for certain rent-related adjustments.

At August 2, 2008 the Company’s $200 million revolving credit facility was undrawn and fully available aside from an ongoing $5.9 million letter of credit in connection with our self-insured workers’ compensation program. Cash and cash equivalents were $35.2 million.

During the 2008 second quarter, cash used in operating activities was $12.0 million, compared with cash used in operating activities of $59.5 million during the 2007 second quarter. The change in cash used in operating activities was impacted by an increase in operating income, due primarily to a decrease in transaction-related costs, and a decrease in working capital, partially offset by higher interest expense paid on the debt incurred to fund the acquisition of the Company. Capital expenditures during the 2008 second quarter were $16.0 million, of which $9.2 million related to new store openings and remodeling projects. Capital expenditures during the 2007 second quarter were $24.6 million.

Year to Date Results
Net sales for the first six months of 2008 declined 2.7% to $687.0 million from $706.1 million. Same store sales decreased 7.0%. For the first six months of 2008, Adjusted EBITDA was $92.4 million compared to $125.0 million in the first six months of 2007.

Store Count as of:	August 2, 2008		February 2, 2008		August 4, 2007
North America		2,142		2,135		2,133
Europe		911		905		883
Subtotal Company-Owned		3,053		3,040		3,016
Joint Venture		205		198		203
Franchise		175		166		149
Subtotal Non-Owned		380		364		352
Total		3,433		3,404		3,368

Conference Call Information
The Company will host its second quarter conference call on September 12, 2008, at 10:00 a.m. (EDT). The call-in number is 630-395-0260 and the password is “Claires.” A replay will be available through September 19, 2008. The replay number is 402-530-7636 and the password is 25247. The conference call is also being webcast and archived until September 19, 2008 on the Company’s corporate website at http://www.clairestores.com, where it can be accessed by clicking on the “Conference Calls” link located under “Financial Information” for a replay or download as an MP3 file.

Company Overview
Claire’s Stores, Inc. is a leading specialty retailer of value-priced jewelry and accessories for girls and young women through its two store concepts: Claire’s^® and Icing^®. While the latter operates only in North America, Claire’s operates worldwide. As of August 2, 2008, Claire’s Stores, Inc. operated 3,053 stores in North America and Europe. Claire’s Stores, Inc. also operates through its subsidiary, Claire’s Nippon, Co., Ltd., 205 stores in Japan as a 50:50 joint venture with AEON, Co., Ltd. The Company also franchises 175 stores in the Middle East, Turkey, Russia, South Africa, Poland and Guatemala.

Forward-looking Statements:
This press release contains “forward-looking statements” which represent the Company’s expectations or beliefs with respect to future events. Statements that are not historical are considered forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those factors include, without limitation: changes in consumer preferences and consumer spending; competition; general economic conditions such as increased energy costs; general political and social conditions such as war, political unrest and terrorism; natural disasters or severe weather events; currency fluctuations and exchange rate adjustments; uncertainties generally associated with the specialty retailing business; disruptions in our supply of inventory; inability to increase same store sales; inability to renew, replace or enter into new store leases on favorable terms; significant increases in our merchandise markdowns; inability to grow our store base in Europe; inability to design and implement new information systems; delays in anticipated store openings or renovations; uncertainty that definitive financial results may differ from preliminary financial results due to, among other things, final GAAP adjustments; changes in applicable laws, rules and regulations, including changes in federal, state or local regulations governing the sale of our products, particularly regulations relating to the metal content in jewelry, and employment laws relating to overtime pay, tax laws and import laws; product recalls; loss of key members of management; increases in the cost of labor; labor disputes; unwillingness of vendors and service providers to supply goods or services pursuant to historical customary credit arrangements; increases in the cost of borrowings; unavailability of additional debt or equity capital; and the impact of our substantial indebtedness on our operating income, and our ability to grow. These and other applicable risks, cautionary statements and factors that could cause actual results to differ from the Company’s forward-looking statements are included in the Company’s filings with the SEC, specifically as described in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008 filed with the SEC on April 25, 2008. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. The historical results contained in this press release are not necessarily indicative of the future performance of the Company.

Additional Information:
Note: Other Claire’s Stores, Inc. press releases, a corporate profile and the most recent Form 10-K and 10-Q reports are available on Claire’s business website at: http://www.clairestores.com.

Contact Information:
J. Per Brodin, Senior Vice President and Chief Financial Officer

Phone: (954) 433-3900, Fax: (954) 433-3999 or E-mail, investor.relations@claires.com

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SECOND FISCAL QUARTER

CLAIRE’S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)

							Predecessor
	Successor Entity						Entity
	Three Months			May 29, 2007			May 6, 2007
	Ended			Through			Through
	August 2, 2008			August 4, 2007			May 28, 2007
Net sales	$	359,973		$	281,190		$	84,328
Cost of sales, occupancy and buying expenses		180,267			138,276			44,846
Gross profit		179,706			142,914			39,482
Other expenses (income):
Selling, general and administrative		132,421			92,746			30,798
Depreciation and amortization		22,561			13,165			4,417
Transaction-related costs		296			2,061			69,186
Other income		(549	)		(396	)		(135	)
		154,729			107,576			104,266
Operating income (loss)		24,977			35,338			(64,784	)
Interest expense (income), net		48,739			35,928			(1,123	)
Loss before income taxes		(23,762	)		(590	)		(63,661	)
Income taxes		(6,831	)		217			8,890
Net loss	$	(16,931	)	$	(807	)	$	(72,551	)

YEAR TO DATE

							Predecessor
	Successor Entity						Entity
	Six Months			May 29, 2007			February 4, 2007
	Ended			Through			Through
	August 2, 2008			August 4, 2007			May 28, 2007
Net sales	$	686,976		$	281,190		$	424,899
Cost of sales, occupancy and buying expenses		352,249			138,276			206,438
Gross profit		334,727			142,914			218,461
Other expenses (income):
Selling, general and administrative		263,756			92,746			154,482
Depreciation and amortization		44,662			13,165			19,652
Transaction-related costs		6,264			2,061			72,672
Other income		(1,109	)		(396	)		(1,476	)
		313,573			107,576			245,330
Operating income (loss)		21,154			35,338			(26,869	)
Interest expense (income), net		97,396			35,928			(4,876	)
Loss before income taxes		(76,242	)		(590	)		(21,993	)
Income taxes		(23,741	)		217			21,779
Net loss	$	(52,501	)	$	(807	)	$	(43,772	)

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CLAIRE’S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	August 2, 2008			February 2, 2008
	(In thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	35,236		$	85,974
Inventories		119,552			117,679
Prepaid expenses		47,643			37,315
Other current assets		47,591			37,658
Total current assets		250,022			278,626
Property and equipment:
Land and building		22,288			22,288
Furniture, fixtures and equipment		140,446			130,130
Leasehold improvements		227,550			211,163
		390,284			363,581
Less accumulated depreciation and amortization		(90,143	)		(53,972	)
		300,141			309,609
Intangible assets, net of accumulated amortization of $11,046 and
$4,762		809,954			777,130
Deferred financing costs, net of accumulated amortization of $12,370		65,220			70,511
and $7,079, respectively
Other assets		76,307			71,754
Goodwill		1,841,346			1,840,867
		2,792,827			2,760,262
Total assets	$	3,342,990		$	3,348,497
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	68,405		$	56,089
Current portion of long-term debt		14,500			14,500
Income taxes payable		6,063			12,191
Accrued interest payable		22,565			19,536
Accrued expenses and other liabilities		120,206			117,076
Total current liabilities		231,739			219,392
Long-term debt		2,362,052			2,363,250
Deferred tax liability		116,486			139,506
Deferred rent expense		14,968			10,572
Unfavorable lease obligations and other liabilities		48,986			10,577
		2,542,492			2,523,905
Commitments and contingencies		—			—
Stockholder’s equity:
Common stock par value $0.001 per share; authorized 1,000 shares; issued and outstanding 100 shares		—			—
Additional paid-in capital		605,116			601,201
Accumulated other comprehensive income, net of tax		15,503			3,358
Retained earnings (deficit)		(51,860	)		641
		568,759			605,200
Total liabilities and stockholder’s equity	$	3,342,990		$	3,348,497

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Net income (loss) reconciliation to EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before provision for income taxes, interest income and expense, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to exclude non-cash and unusual items. Management uses Adjusted EBITDA as an important tool to assess our operating performance. Management considers Adjusted EBITDA to be a useful measure in highlighting trends in our business and in analyzing the profitability of similar enterprises. Management believes that Adjusted EBITDA is effective, when used in conjunction with net income (loss), in evaluating asset performance, and differentiating efficient operators in the industry. Furthermore, management believes that Adjusted EBITDA provides useful information to potential investors and analysts because it provides insight into management’s evaluation of our results of operations. Our calculation of Adjusted EBITDA may not be consistent with “EBITDA” for the purpose of the covenants in the agreements governing our indebtedness.

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP, are not intended to represent cash flow from operations under GAAP and should not be used as an alternative to net income (loss) as an indicator of operating performance or to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using EBITDA and Adjusted EBITDA by using it only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business. Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of the limitations of EBITDA and Adjusted EBITDA are:

• EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;

• Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;

• EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and

• EBITDA and Adjusted EBITDA do not reflect non-recurring expenses which qualify as extraordinary items such as one-time write-offs to inventory and reserve accruals.

While EBITDA and Adjusted EBITDA are frequently used as a measure of operations and the ability to meet indebtedness service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

While management believes that these measures provide useful information to investors, the SEC may require that EBITDA and Adjusted EBITDA be presented differently or not at all in filings we will make with the SEC.

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CLAIRE’S STORES, INC. AND SUBSIDIARIES
(UNAUDITED)
(IN THOUSANDS)

	Successor			Predecessor			Successor
	Entity			Entity			Entity			Combined
	May 4, 2008			May 6, 2007			May 29, 2007			Thirteen Weeks
	Through			Through			Through			Ended
	August 2, 2008			May 28, 2007			August 4, 2007			August 4, 2007
Net loss	$	(16,931	)	$	(72,551	)	$	(807	)	$	(73,358	)
Income tax expense (benefit)		(6,831	)		8,890			217			9,107
Interest expense		49,096			19			36,840			36,859
Interest income		(357	)		(1,142	)		(912	)		(2,054	)
Depreciation and amortization		22,561			4,417			13,165			17,582
Reported EBITDA		47,538			(60,367	)		48,503			(11,864	)
Book to cash rent adjustment (a)		1,556			177			1,328			1,505
EBITDA after rent related adjustment		49,094			(60,190	)		49,831			(10,359	)
Amortization of intangible assets (b)		574			119			248			367
Equity loss (income) (c)		(32	)		(17	)		33			16
(Gain) loss on retirement of property and equipment, net (d)		(81	)		270			461			731
Stock compensation expense (e)		1,148			—			889			889
Legal settlement & related costs (f)		161			100			—			100
Relocation costs (g)		744			—			—			—
Consulting expenses (h)		297			90			194			284
Fixture leases (i)		96			103			262			365
Cost savings (j)		—			150			33			183
Management fee (k)		750			—			500			500
Transaction related costs (l)		296			69,186			2,061			71,247
Pan European Transformation costs (m)		3,428			—			—			—
Cost Savings Initiative costs (n)		1,671			—			—			—
Adjusted EBITDA	$	58,146		$	9,811		$	54,512		$	64,323

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CLAIRE’S STORES, INC. AND SUBSIDIARIES
(UNAUDITED)
(IN THOUSANDS)

	Successor			Predecessor			Successor
	Entity			Entity			Entity			Combined
	Feb. 3, 2008			Feb. 4, 2007			May 29, 2007			Twenty Six Weeks
	Through			Through			Through			Ended
	August 2, 2008			May 28, 2007			August 4, 2007			August 4, 2007
Net loss	$	(52,501	)	$	(43,772	)	$	(807	)	$	(44,579	)
Income tax expense (benefit)		(23,741	)		21,779			217			21,996
Interest expense		98,283			86			36,840			36,926
Interest income		(887	)		(4,962	)		(912	)		(5,874	)
Depreciation and amortization		44,662			19,652			13,165			32,817
Reported EBITDA		65,816			(7,217	)		48,503			41,286
Book to cash rent adjustment (a)		3,623			677			1,328			2,005
EBITDA after rent related adjustment		69,439			(6,540	)		49,831			43,291
Amortization of intangible assets (b)		1,102			622			248			870
Equity loss (income) (c)		101			(665	)		33			(632	)
(Gain) loss on retirement of property and equipment, net (d)		(54	)		1,201			461			1,662
Stock compensation expense (e)		3,915			1,275			889			2,164
Legal settlement & related costs (f)		373			200			—			200
Relocation costs (g)		744			—			—			—
Consulting expenses (h)		1,132			341			194			535
Fixture leases (i)		255			479			262			741
Cost savings (j)		—			897			33			930
Management fee (k)		1,500			—			500			500
Transaction related costs (l)		6,264			72,672			2,061			74,733
Pan European Transformation costs (m)		5,983			—			—			—
Cost Savings Initiative costs (n)		1,671			—			—			—
Adjusted EBITDA	$	92,425		$	70,482		$	54,512		$	124,994

The following footnotes relate to the tables on pages 7 and 8:

(a)	Represents the elimination of net non-cash rent expense, amortization of rent free periods and the inclusion of cash landlord allowances.
(b)	Represents the elimination of non-cash amortization of lease rights.
(c)	Represents the elimination of non-cash equity income or loss related to our 50:50 joint venture with AEON Co. Ltd.
(d)	Represents the elimination of non-cash losses on store related property and equipment primarily associated with remodels, relocations and closures.
(e)	Represents the elimination of non-cash stock compensation expense.
(f)	Represents the elimination of a legal settlement and fees in connection with wage and hour class action litigation in California.
(g)	Consists of costs, including third party charges and compensation, incurred in conjunction with the relocation of new employees.

7

(h)	Represents the elimination of non-recurring consulting expenses.
(i)	Represents the elimination of non-cash amortization expenses associated with synthetic leases of store fixtures. The Company has not entered into any new synthetic leases after 2001.
(j)	Reflects the adjustment of executive air travel and other costs to the Company’s estimate for such costs on a normalized basis and the estimated savings on directors’ and officers’ insurance reflective of the Company no longer being a public company. For purposes of estimating these savings, we assumed an annual air travel budget of $250,000 for our senior executive officers.
(k)	Represents the management fee paid to Apollo Management and Tri-Artisan Capital Partners.
(l)	Transaction costs represent legal, financial advisory, compensation, severance and other acquisition related expenses.
(m)	Represents the non-recurring costs of our strategic Pan-European Transformation project. These costs consist primarily of consulting fees, compensation and legal expense incurred under the buying and SG&A expense lines.
(n)	Represents the non-recurring costs relating to our Cost Savings Initiative project. These costs consist primarily of consulting fees.

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