Forever 21’s U.S. retail operator has filed for bankruptcy, the second time for the brand, which has been battered by diminishing mall traffic, inflation and online competition.
The company said it stores and website in the U.S. would stay open for the time being, but that it would start to wind down its U.S. business.
“While we have evaluated all options to best position the company for the future, 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,” Brad Sell, CFO of F21 OpCo said Sunday in a statement.
The de minimis tax exemption allows shipments headed to U.S. businesses and consumers valued at less than $800 to enter the country tax and duty free.
A one-time destination for shoppers last filed Chapter 11 in 2019.
“The company will conduct liquidation sales at its stores while simultaneously conducting a court-supervised sale and marketing process for some or all of its assets,” it stated. F21 OpCo is holding out the possibility of a sale that would allow it to “pivot away from a full wind-down of operations to facilitate a going-concern transaction.”
Forever 21’s locations outside the U.S. are run by other licensees and are not impacted.
Diminishing mall traffic
Founded in 1984, Forever 21 and other so called fast-fashion retailers including H&M and Zara were popular with young shoppers in the mid-1990s, then gained traction among bargain-seeking consumers during the Great Recession.
Forever 21 then expanded its number of stores as shoppers were moving online, leaving the retailer too large and in malls with diminishing foot traffic, according to Neil Saunders, managing director of GlobalData.
Forever 21 operates more than “540 locations globally and online,” according to the retailer’s website.
“Forever 21 was always a retailer living on borrowed time. Over recent years it has been hit with dual headwinds from a weak apparel market and stiff competition from cheap Chinese marketplaces,” Saunders said. “The hope that Forever 21 lives on comes through the sale of the brand, which would allow it to remain as an online operation and through possible licensing arrangements.”
