Forever 21, once a dominant force in fast fashion, has filed for Chapter 11 bankruptcy for the second time in six years. The filing, made on Sunday, marks the downfall of its U.S. operating company, F21 OpCo, which failed to find a buyer for its 350 U.S. stores. The company, which once boasted around 800 stores worldwide, is now preparing for liquidation while exploring potential sales of some or all of its assets.
Role of Online Rivals and Changing Consumer Trends
The rise of e-commerce giants like Amazon, Shein, and Temu has severely impacted traditional brick-and-mortar retailers, including Forever 21. These online platforms offer ultra-cheap products, often bypassing U.S. import duties through the “de minimis” exemption, a legal loophole that allows goods valued under $800 to enter the country tariff-free. Forever 21 executives claim that this exemption allowed competitors to undercut their pricing, making it difficult to compete.
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Forever 21’s Chief Financial Officer, Brad Sell, highlighted the impact of foreign retailers, stating, “We have been unable to find a sustainable path forward, given competition from foreign fast fashion companies … as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends.”
Failed Attempts to Revive the Brand
Forever 21’s first bankruptcy in 2019 resulted in a buyout by a joint venture between Authentic Brands Group (ABG), Simon Property Group, and Brookfield Asset Management. Despite efforts to revive the brand, including a 2023 partnership with Shein, the retailer struggled to regain its footing. The Covid-19 pandemic, high inflation, and supply chain disruptions further eroded its financial stability.
By fiscal 2024, Forever 21 had racked up losses exceeding $400 million over three years, with another $180 million in projected losses through 2025. The company’s liabilities now stand between $1 billion and $10 billion—ten times greater than its estimated assets of $100 million to $500 million.
The End of an Era?
While Forever 21’s U.S. stores and website remain operational during the bankruptcy proceedings, the company’s future remains uncertain. Its international stores are unaffected, and Authentic Brands Group still owns its trademark and intellectual property, suggesting that the Forever 21 name could live on under a different business model.
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Jamie Salter, CEO of Authentic Brands, has publicly expressed regret over acquiring the company, calling it “the biggest mistake I made.” Nonetheless, ABG’s Global President of Lifestyle, Jarrod Weber, remains optimistic about the brand’s potential, stating that the restructuring presents an opportunity for modernization.