Forever 21 store closures accelerated by competition from Shein and Temu
Hundreds of Forever 21 U.S. stores will close by the end of March after overwhelming years of economic pressures and relentless competition in the fast fashion space.
F21 OpCo, the operator of Forever 21 stores and licensee of the brand in the United States, filed for bankruptcy protection in the Bankruptcy Court for the District of Delaware for the second time in six years on Sunday.
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"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," F21 OpCo CFO Brad Sell said in a statement.
The company said while it is winding down its U.S. operations, it continues to seek a buyer for some or all of its assets. Sarah Foss, bankruptcy expert attorney and Head of Legal at Debtwire, believes it's "unlikely that a white knight will emerge to purchase all or a portion of its retail locations."
According to court documents, the store closing process is already underway with the first wave of Forever 21’s worst-performing locations closing by the week of March 30.
According to court documents, closures will impact approximately 236 stores will be impacted during the first wave of closures as the company says it is "unlikely that any third party would be interested in acquiring these locations as part of a going concern transaction." The remaining stores are expected to shut their doors for good by May 1.
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Foss highlighted how the fast-fashion retail chain has continued to confront challenges ever since its first trip through bankruptcy in September 2019, when the company closed more than 100 of its 534 stores and sold the rest to a consortium of buyers.
Forever 21 owners Authentic Brands Group and Simon Property Group, created a joint venture, Sparc Group, to keep the company alive in 2019. In January, Sparc Group teamed up with JCPenney to form a new organization, Catalyst Brands.
The fashion retailer joins low-cost party goods retail chain Party City and sewing and crafts retailer Joann, all of which filed for protection again. There have been 20 Chapter 11 filings since the beginning of 2024, but 25 retail chains have had at least two bankruptcy filings since 2016, according to Debtwire data.
"Brick-and-mortar retailers like Forever 21 operate in a highly competitive retail environment where the cost of doing business is expensive and rising with inflation rates," Foss said, adding that "the final nail in the coffin for a low-cost fast fashion retailer like Forever 21 is having to compete with ultra low-cost online retailers such as Shein and Temu which are able to take advantage of the de minimis exemption which exempts goods valued under $800 from import duties and tariffs."
Shein and Temu offer a range of products and clothing at low prices. The companies face criticism over labor practices, environmental concerns, and business ethics such as intellectual property infringement.
John Mercer, head of global research for Coresight Research, also highlighted how the competitive pressures from these fast-fashion platforms, which risen in prominence in recent years as inflationary consumers leveraged their cheap prices, will continue to drive a surge of retail closures in 2025.
The firm estimated that there will be 15,000 closures this year. The firm also projected about 5,800 store openings nationwide this year, but results in a net loss.
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However, Foss said this doesn't mean the end of the company.
The company’s trademark and intellectual property, which is owned by an affiliate of Authentic Brands Group, is not part of the bankruptcy and will live on in some form, Foss said.