Early fast-fashion staple Forever 21 filed for Chapter 11 bankruptcy on Sunday, the second time in six years, as the brand struggles amid dwindling mall traffic and stiff competition online, reports Reuters.
The slow death of shopping malls, once the meccas of daily commerce, and the rise of e-commerce has led dozens of well-known brands to collapse in recent years. Forever 21 listed its estimated assets between US$100 million and US$500 million in filings to the bankruptcy court, with liabilities of US$1 billion to US$10 billion.
After it first filed for Chapter 11 in 2019, Forever 21 was bought out of bankruptcy by Sparc, a joint venture between label owner Authentic Brands Group and mall operators Simon Property and Brookfield Asset Management. (The CEO of Authentic Brands said last year that acquiring Forever 21 was “the biggest mistake I made.”) This time, Forever 21 has been unable to find a buyer for its roughly 350 US stores and will likely be liquidated.
Although F21 OpCo, which operates the US stores, will continue to engage with potential buyers for some or all of its US business, stores in the US will be conducting closing sales, and the company will honour customer gift cards during the first 30 days of its bankruptcy. Its international stores remain unaffected.
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Founded in 1984 by South Korean immigrants in Los Angeles, Forever 21 took off among younger shoppers looking for trendy clothes at an affordable price. By the mid-2010s it was operating around 800 stores worldwide, including 500 stores in the US.
That rapid expansion, however, came at a cost. It snapped up properties that were far too large and the money spent on expanding into new markets left the company unable to invest sufficiently in its supply chain, hobbling its ability to keep up with rapid trend cycles.
The rise of e-commerce only exacerbated the problem. Brad Sell, finance chief at F21 OpCo, explained to the Guardian that the company was “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.” Chinese retailers like Shein and Temu earn this waiver of US tariffs on imported goods by shipping their products to buyers in packages worth US$800 or less.
Shein actually has a financial stake in Forever 21, having acquired an approximately one-third interest in Sparc Group in 2023, a deal that also made Sparc a minority shareholder in Shein. Its extensive e-commerce expertise appears to have done little to help the brand so far, though it may be more useful once Forever 21 is no longer burdened by expensive brick-and-mortar stores. There are reports that its trademark and intellectual property, owned by Authentic, may live on in a different form.
