Retailer struggles amid rising competition from Amazon, Temu, and Shein
Forever 21 has filed for bankruptcy protection for the second time, as declining foot traffic in U.S. shopping malls and intensifying competition from online retailers such as Amazon, Temu, and Shein continue to impact sales.
Company to wind down U.S. operations under Chapter 11
F21 OpCo, which operates Forever 21 stores, announced late Sunday that it will wind down its U.S. business under Chapter 11 bankruptcy protection while exploring options to either continue with a partner or sell some or all of its assets.
“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,” said Chief Financial Officer Brad Sell in a statement.
The de minimis tax exemption allows shipments valued at less than $800 to enter the U.S. duty-free, benefiting foreign fast fashion brands and making it difficult for Forever 21 to compete on price.
U.S. stores to hold liquidation sales, international operations unaffected
As part of the bankruptcy process, Forever 21’s U.S. stores will hold liquidation sales, and its website will remain operational while winding down operations.
However, the retailer’s international locations, which are operated by licensees, are not part of the bankruptcy filing and will continue operating as usual.
F21 OpCo stated that Authentic Brands Group (ABG), which owns Forever 21’s international intellectual property, may license the brand to other operators moving forward.
Forever 21’s previous bankruptcy and struggles
Forever 21 first filed for bankruptcy in 2019, after which it was acquired by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners.
Founded in 1984, Forever 21 was a key player in the fast-fashion wave alongside H&M and Zara, gaining massive popularity among young shoppers in the 1990s. Its success grew during the Great Recession when budget-conscious consumers sought affordable fashion.
However, the company’s aggressive expansion came just as shoppers were shifting to online retail, creating significant financial challenges.
Industry experts weigh in
“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,” said Neil Saunders, Managing Director of GlobalData.
“Both things have eroded its standing and depleted its market share.”
Saunders also noted that Forever 21’s store sizes are too large for its current needs, and many locations are situated in malls with declining foot traffic, further compounding its struggles.