A once popluar clothing chain that was once a staple in malls across America has filed for its second bankruptcy in five years.
Forever 21’s US store operator has struggled as traffic in shopping malls fades and competition from online retailers like Amazon, Temu and Shein intensifies.
F21 OpCo said late Sunday that it will wind down the business in the US under Chapter 11 bankruptcy protection.
All 200 US stores are will shut unless a buyer steps in at the last minute. Bosses are planning liquidating sales – which means shoppers can get deals as stock is sold off.
But Forever 21 is set to live on since the company that owns the brand plans to turn it into an online-only retailer in the US. International stores are not affected.
At its peak, Forever 21 – the go-to store for American teenagers for decades – had more than 500 stores in the US and 800-plus globally. It was founded in Los Angeles in 1984 by South Korean immigrants.
‘Forever 21 has been battered by the rise of Shein and to a certain extent Temu,’ retail expert Neil Saunders told DailyMail.com.
‘It has also faced competition from other mall players like Zara, Uniqlo, and others. Basically, the competitive bar is now set a lot higher in fast fashion, and Forever 21 has had trouble getting over it.
Forever 21 is renegotiating the leases for its some 380 stores in the US as commercial rents soar across the country
‘The truth is that Forever 21 has lost any sense of personality. It has massive stores which are far too big for its needs, and which are full of product that lacks an identity and is nothing special.’
It was only in 2019 that the chain last filed for bankruptcy. Under that it shut hundreds of stores and emerged in 2020 with a new owner.
F21 OpCo blamed companies taking advantage of duty-free treatment of low-cost packages from China to undermine its pricing power.
‘We’ve 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,’ said Brad Sell, finance chief at F21 OpCo that operates Forever 21’s roughly 350 U.S. stores.
De minimis refers to the US waiver of standard customs procedures and tariffs on imported items worth less than $800 that are shipped to individuals and helps Chinese online retailers such as Shein and Temu to keep prices ultra-low.
F21 OpCo licensed Forever 21 from Authentic Brands, a New York-based company that also owns the likes of Reebok, Champion, Ted Baker and Brooks Brothers. Authentic plans to keep the brand alive online.
Jarrod Weber, global president of lifestyle at Authentic, said: ‘Forever 21 is one of the most recognizable names in fast fashion. It is a global brand rooted in the US with a strong future ahead.
‘Retail is changing, and like many brands, Forever 21 is adapting to create the right balance across stores, e-commerce, and wholesale.
A line of shoppers get the first opportunity to shop on the opening day of fast fashion e-commerce giant Shein, which hosted a pop up inside Forever 21 at the Ontario Mills Mall in Ontario on October 19, 2023
‘Our US licensee’s decision to restructure its operations does not impact Forever 21’s intellectual property or its international business.
‘It presents an opportunity to accelerate the modernization of the brand’s distribution model, setting it up to compete and lead in fast fashion for decades to come.
‘We’re building a direct creation-to-shelf model that moves faster. It will accelerate production cycles and deliver the best products at the best prices.
‘We are receiving lots of interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level.’
This licensing model has become increasingly common, with companies acquiring struggling but well-known retail brands and leasing their names to third-party operators.
Authentic acquired Forever 21 in 2020 after its first bankruptcy, which saw hundeds of stores shuttered.
In January last year, Authentic CEO Jamie Salter said the deal was ‘probably the biggest mistake’ of his career.
He added that he failed to see Shein and Temu as serious competitors and by the time he recognized the threat they posed, the damage was already done.
Temu is another Chinese-based e-commerce retailer that sells clothes at ultra-cheap prices. It, along with Shein, have emerged as Forever 21’s main competitors
Pictured: Forever 21’s flagship location in Times Square, Manhattan. It spans 90,000 square feet and has four floors
Authentic Brands CEO Jamie Salter, pictured, said that acquiring Forever 21 was ‘probably the biggest mistake’ of his career. He added that he failed to see Shein and Temu as serious competitors and by the time he recognized the threat they posed, the damage was already done
At its peak in 2015, Forever 21 was worth $6 billion, making its married South Korean founders Do Won Chang and Jin Sook Chang supremely wealthy.
Signs of trouble surfaced last summer when Forever 21 asked landlords for rent reductions of up to 50 percent in some locations.
The announcement comes as American stores accelerate retail closures.
Dozens of giant chains — including Macy’s, Party City, and Big Lots — launched a massive slate of store closures in the past 12 months amid changing customer trends.
A study recently revealed that retailers across America are expected to accelerate store closures to 15,000 shuttered locations this year. Just over 7,300 stores closed shop last year.
