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.”

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…