Forever 21 has once again filed for bankruptcy protection, this time intending to shut down its operations in the United States. The decision comes amid declining foot traffic in U.S. shopping malls and fierce competition from online giants like Amazon, Temu, and Shein.
F21 OpCo, which manages Forever 21 retail locations, announced on Sunday that it would pursue winding down its U.S. operations under Chapter 11 bankruptcy protection. The company is currently evaluating whether it can continue with a partner or if it must divest some or all of its assets.
Chief Financial Officer Brad Sell explained in a statement that despite exhaustive efforts to secure the company’s future, a viable path forward was elusive given the competitive landscape. Foreign fast-fashion competitors have leveraged the de minimis exemption to challenge Forever 21’s pricing strategy, he noted. The exemption allows tax-free and duty-free entry into the U.S. for shipments valued under $800.
As the U.S. stores prepare for liquidation sales, the Forever 21 website will continue its operations temporarily. International outlets, which operate independently of the U.S.-based business and are not affected by the bankruptcy filing, remain open. These operations are under the ownership of Authentic Brands Group, which holds the brand’s international intellectual property.
According to Jarrod Weber, Global President, Lifestyle at Authentic Brands Group, the restructuring offers an opportunity to modernize Forever 21’s distribution model, aiming to solidify its position in the fast-fashion industry for the long term. The company is attracting interest from potential partners eager to elevate the brand.
Forever 21 initially entered bankruptcy in 2019, after which it was acquired by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. In early January, its parent company, Sparc Group, merged with JCPenney to form a new entity, Catalyst Brands, which also incorporates other well-known brands like Aéropostale and Brooks Brothers.
In 2023, a partnership with Chinese e-commerce platform Shein allowed Forever 21 products to be sold on Shein’s site, also enabling Shein returns at select Forever 21 stores in the U.S. Forever 21’s struggle is part of a larger trend, as several retailers have filed for Chapter 11 or begun liquidations due to declining consumer spending and rising operational costs, including companies like Joann Inc and Party City.
Data from Coresight Research indicates that between January 1 and March 14, U.S. retailers have already announced 3,735 store closures. Forever 21’s troubles began in earnest in the mid-1990s despite initially capitalizing on fast fashion’s popularity among cost-conscious young consumers during economic downturns. However, the brand failed to adapt swiftly to the burgeoning online shopping trend and faced mounting competition from nimble players like Shein and Temu.
Commenting on the retailer’s predicament, Neil Saunders, managing director at GlobalData, emphasized that Forever 21 is grappling with oversized stores situated in underperforming malls. The brand’s difficulties are compounded by a weak apparel market and the competitive pricing of Chinese marketplaces, solidifying the notion that the retailer was on borrowed time as its market share waned.
