Forever 21’s U.S. retail operator has declared bankruptcy for the second time, citing declining mall traffic, inflation, and online competition.
The company said its stores and website in the United States would remain open for the time being, but it would begin to wind down its U.S. operations.
“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,” Brad Sell, the chief financial officer of F21 OpCo, said in an interview.
The de minimis tax exemption allows shipments to US businesses and consumers worth less than $800 to enter the country tax and duty-free.
In 2019, a once-popular shopping destination filed for Chapter 11.
“The company will conduct liquidation sales at its stores while simultaneously conducting a court-supervised sale and marketing process for some or all of its assets,” according to the statement. F21 OpCo is considering a sale so that it can “pivot away from a full wind-down of operations to facilitate a going-concern transaction.”
Forever 21’s locations outside the United States are managed by other licensees and are not affected.
Diminishing mall traffic
Founded in 1984, Forever 21 and other so-called fast-fashion retailers such as H&M and Zara were popular with young shoppers in the mid-1990s before gaining traction among bargain-seeking consumers during the Great Recession.
According to Neil Saunders, managing director of GlobalData, Forever 21 expanded its number of stores as customers moved online, leaving the retailer too large and in malls with declining foot traffic.
According to its website, Forever 21 has over “540 locations globally and online.”
“Forever 21 has always been a retailer operating on borrowed time. In recent years, it has faced dual headwinds from a weak apparel market and stiff competition from low-cost Chinese marketplaces,” Saunders said.
“The hope that Forever 21 lives on comes through the sale of the brand, which would allow it to remain as an online operation and through possible licensing arrangements.”
