Retailer Forever 21 files for bankruptcy for second time in 6 years
Forever 21's U.S. operating company filed for Chapter 11 bankruptcy on Sunday, marking the second time in six years.
F21 OpCo made the move after the retailer, once known for affordable, on-trend fashions among teenagers and younger adults, was unable to find a buyer for its roughly 350 U.S. stores.
With most stores inside malls, the retailer says it was crippled by dwindling foot traffic and increased competition from online retailers.
"We have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends," Brad Sell, F21 OpCo's chief financial officer, said, according to Reuters.
FOREVER 21 LIKELY TO SHUTTER REMAINING STORES WITH SECOND BANKRUPTCY NEARING
De minimis refers to the U.S. waiver of standard customs procedures and tariffs on imported items worth less than $800 that are shipped to individuals. Some of the largest e-commerce competitors to the company are Amazon, Shein and Temu.
Forever 21 was founded in Los Angeles in 1984 by South Korean immigrants. By 2016, it was operating around 800 stores globally, with 500 of those in the United States.
BANKRUPT FOREVER 21'S FAST FASHION NOT QUICK ENOUGH TO SATISFY MILLENNIAL FOMO
The clothing chain has faced issues since its first trip through bankruptcy in September 2019, during which it closed over 150 of its 534 stores and sold the rest.
Forever 21 is currently owned by Catalyst Brands, an entity formed on Jan. 8 through the merger of Forever 21's previous owner, Sparc Group, and JC Penney, a department store chain owned since 2020 by mall operators and Simon Property Group.
FOREVER 21 FILES FOR BANKRUPTCY PROTECTION
Last month, when news of the looming bankruptcy came to light, a source familiar with the matter told Bloomberg that the company was preparing to close at least 200 of its remaining 350 locations as part of the bankruptcy process.
Now, Reuters reports, F21 OpCo plans liquidation sales of its stores while it goes through a court‑supervised sale and marketing process for some or all of its assets.
PRESSURE FROM SHEIN, TEMU ACCELERATE RETAIL CLOSURES
Its stores and website in the United States will remain open and continue serving customers, and its international stores remain unaffected.
The company listed its estimated assets in the range of $100 million to $500 million, according to a filing with bankruptcy court in the District of Delaware obtained by Reuters, and liabilities in the range of $1 billion to $10 billion. The filing showed that it has between 10,001 and 25,000 creditors.
CLICK HERE TO READ MORE ON FOX BUSINESS
In the event of a successful sale, Forever 21 may pivot away from a full wind-down of operations to facilitate a going-concern transaction.
Forever 21's trademark and other intellectual property are owned by Authentic Brands. Authentic will continue to control the brand, which could live on in some form. Authentic Brands CEO Jamie Salter said last year that acquiring Forever 21 was "the biggest mistake I made."
FOX Business' Daniella Genovese and Reuters contributed to this report.