Clothing store Forever 21 has long been synonymous with shopping malls across the United States. The fast-fashion giant, which previously filed for bankruptcy in 2019, is facing financial turmoil once again.
The retailer has sought Chapter 11 protection for a second time, citing competition from fast fashion companies overseas and an inability to sustain physical store locations.
Why It Matters
Forever 21 has filed for bankruptcy for the second time, marking another significant blow to the retail industry.
The latest Chapter 11 filing comes just six years after the company’s first bankruptcy in 2019. The move signals continued challenges for brick-and-mortar fashion brands, as shifting consumer habits and rising operational costs have made it difficult for some retailers to stay afloat.
When Did Forever 21 File for Bankruptcy?
Forever 21 officially filed for Chapter 11 bankruptcy protection on March 16, according to official records.
The company stated that it will wind down its U.S. businesses “while continuing to conduct a marketing process to solicit interest in a going concern transaction or a sale of some or all of its assets,” according to a press release.
Forever 21’s locations outside of the U.S. are operated by other licensees and are not included in the Chapter 11 filings.
The bankruptcy filing comes amid declining sales. In the press release, Brad Sell, chief financial officer (CFO) of Forever 21, cited “foreign fast fashion companies” as a major source of competition for the business.
Sell noted that some of these companies are able to take advantage of the de minimis exemption—or consent of shipments of goods valued at or under $800 to enter the country duty-free—”to undercut our brand on pricing and margin.”
The de minimis rule benefits Chinese e-commerce businesses, like Shein and Temu, enabling them keep prices low.
In February, President Donald Trump temporarily halted his administration’s plans to eliminate the clause while rolling out a new wave of tariffs on China.
“While we have evaluated all options to best position the Company for the future, we have been unable to find a sustainable path forward,” he said in the press release.
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Who Owns Forever 21?
Forever 21 was originally founded in 1984 by Do Won Chang and Jin Sook Chang, who grew the brand into a fashion powerhouse before its first bankruptcy in 2019.
Following that bankruptcy, the company was acquired by a consortium consisting of Simon Property Group, Brookfield Property Partners, and Authentic Brands Group (ABG).
According to Reuters, Forever 21 is currently owned by Catalyst Brands, which was formed earlier this year. However, ABG owns Forever 21’s trademark and intellectual property.
Despite efforts to modernize and restructure, Forever 21 continued to struggle.
Jamie Salter, CEO of ABG, last year admitted that acquiring the retailer was “one of the biggest mistakes” the company had made, as reported by Fox Business. At the time, he said that he was putting weight on the partnership the business had with Shein.
Will There Be Closing Sales at Forever 21?
With the closure of all U.S. stores, customers can expect liquidation sales at remaining locations.
The company has not yet announced an official timeline for the closures, but the first court hearing for the company, with United States Bankruptcy Judge for the District of Delaware, will take place on Tuesday at 11 a.m. ET.
According to its website, Forever 21 is located in more than 540 locations globally and online.
Will Forever 21 Still Be Available Online?
Despite the closures, Forever 21’s digital presence will continue, per the press release. Forever 21’s website is expected to remain operational, allowing customers to shop online as the company transitions away from physical stores.