Retailer Forever 21 filed for Chapter 11 bankruptcy protection last night, requesting approval to close as many as 178 stores in the U.S. and saying it will shut down most of its locations in Asia and Europe but will remain in Mexico and Latin America.
“This does NOT mean that we are going out of business,” it emphasizes in a letter to its customers.
“The retailer said the exact number of closures would be contingent on negotiations with landlords, but ‘we … expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S.,’” Nathan Bomey reports for USA Today.
“With more than 800 locations overall, Forever 21 is one of the largest specialty apparel retailers in the country. The company's stores average 38,000 square feet, making it smaller than the average department store but larger than many of its apparel competitors,” Bomey adds.
“What we’re hoping to do with this process is just to simplify things so we can get back to doing what we do best,” Linda Chang, the chain’s executive vice president, tells The New York Times’ Sapna Maheshwari.
“Ms. Chang’s parents, Do Won and Jin Sook Chang, who still run the chain, founded Forever 21 in the 1980s after immigrating to California from South Korea. The bankruptcy is a blow to a company that prided itself on embodying the American dream, as well as a reminder of how quickly the retail landscape is transforming. Forever 21 experienced big success in the early 2000s with its troves of merchandise that imitated of-the-moment designer styles at rock-bottom prices,” Maheshwari continues.
“In recent years, though, sustainable fashion has caught on with the younger generation, who put increased focus on the impact of the clothes they buy on the environment. Since June 2017, shares of Zara-parent Inditex have fallen 27%, while shares of H&M have fallen 23%,” CNBC’s Lauren Hirsch and Lauren Thomas observe.
“Sustainable brands like Reformation, meantime, are growing. Private equity firm Permira took a stake in Reformation earlier this year.
“Secondhand websites like The Real Real have exploded in popularity. By 2028, the used-fashion market in the U.S. is expected to reach $64 billion, while fast-fashion will reach $44 billion, according to retail analytics firm GlobalData,” Hirsch and Thomas add.
“Forever 21 joins Barneys New York and Diesel USA in a growing list of retailers seeking bankruptcy protection as they battle online competitors. Others like Payless ShoeSource and Charlotte Russe have shut down completely,” the AP’s Anne D’Innocenzio reports.
“The numbers bear out the crisis facing traditional retailers. So far this year, publicly traded U.S. retailers have announced they will close 8,558 stores and open 3,446, according to the global research firm Coresight Research. That compares with 5,844 closures and 3,258 openings in all of 2018. Coresight estimates the store closures could number 12,000 by the end of 2019,” D’Innocenzio writes.
Forever21 “lists both assets and liabilities in the range of $1 billion to $10 billion, according to the court filing in the U.S. Bankruptcy Court for the District of Delaware. The retailer said it received $275 million in financing from its existing lenders with JPMorgan Chase Bank, N.A. as agent, and $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds,” Rama Venkat and Aishwarya Venugopal report for Reuters.
“Just two weeks ago, Forever 21 was in negotiations with landlords, such as Simon Property Group, in an effort to get them to take an investment stake in the business. The goal of those talks was to secure a deal and file a pre-packaged Chapter 11 petition. With landlords on board, that would have likely allowed Do Won to continue the business. Talks broke off on Friday, and a filing was expected to occur within days given the chain’s liquidity crunch,” Vicki M. Young writes for Sourcing Journal.
“At their peak in 2015, the family was worth a combined $5.9 billion, but just three years later the family fell from the Forbes billionaires list,” Daniella Scott writes for Cosmopolitan.
“You eventually changed your name from ‘Fashion 21’ to ‘Forever 21.’ What's the thinking behind your brand?” CNN’s Kristie Lu Stout asked founder Do Won Chang in an interview in 2012.
Through a translator, he replied: “Our target customers are people in their 20s. Old people wanted to be 21 again, and young people wanted to be 21 forever.”
Nowadays, many brick-and-mortar retailers are just hoping to get to their next birthday.