- Forever 21 was started in 1984
- It’s shop count once increased to 800 stores in 57 countries
- It is now considering to close up to 178 stores
Low-price fashion chain Forever 21 has filed for Chapter 11 bankruptcy protection. Forever 21 was once a one-time hot destination for adolescent shoppers that fell victim to its own fast growth and altering customer tastes.
The privately-owned Los Angeles-based business claims it is going to close up to 178 shops. Once in 57 nations, the business had more than 800 shops.
Nevertheless, we expect a significant number of these stores to remain open and operate as usual, and we don’t expect to exit any major U.S. markets,” the firm said.
The capacity to lease and close lower-cost shops is the main benefit that distributors can gain from the bankruptcy process. Linda Chang, the company’s executive vice president, said in a news release that filing for Chapter 11 is “a significant and essential step towards securing our company’s future that will allow us to reorganize our business and reposition Forever 21.”
Forever 21 is the recent retailer in difficulty with online shopping ascendancy that has cut foot traffic to malls and brick-and-mortar stores. Traditional retailers have also been burdened by high debt rates and lease expenses. Even good distributors have closed shops in the latest years, and those who struggle have filed for bankruptcy.
“Retailers who rely on debt to finance their development have always been particularly prone to slowdowns,” said Greg Portell, lead partner of retail consulting firm A.T’s worldwide consumer and retail practice.
According to Coresight Research, retailers in the United States have announced more than 8,200 shop closures so far this year, already exceeding last year’s total of 5,589. For a second time, both Payless and Gymboree filed for bankruptcy, closing almost 3,000 shops between them. Coresight predicts that further retail shutdowns will pile up and may reach 12,000 by the end of 2019.
Forever 21 History:
Forever 21 was established by South Korean immigrants Do Won Chang and his wife, Jin Sook, in a tiny Los Angeles shop in 1984. The chain extended rapidly in suburban malls and catered with a combination of cheap basics for young girls and females. With its frequently updated combination of clothes, the firm perfected the fast-fashion model, drawing in clients that were provided in department stores or single brands.
“In every day we get fresh merchandise. It’s generally one or two days a week with most mall shops,” said a shop manager in 2001. “We always have the latest styles.”
The chain constructed huge shops in the core of New York’s Times Square, like its four-story, 90,000-square-foot flagship with 151 fitting spaces. And while in the latest years many distributors have begun to park their network of shops back, Forever 21 has continued to add shops as lately as 2016.
In the latest years, traditional brick-and-mortar retailers specializing in selling clothes to adolescents and young adults have struggled as fashion cycles shorten and younger customers move from mall to internet shopping.
During the last five years, Wet Seal, American Apparel and Delia filed for bankruptcy and closed all of their shops. In 2016, Aeropostale filed for bankruptcy but kept open some shops. This year, too, Charlotte Russe filed for bankruptcy.
After being bought by private equity firms or hedge funds, many distributors have run into difficulty, piling up on debt. On the other hand, Forever 21 is still owned by its founders. Forbes lists Won and Chang as having a net value of $1.5 billion, and the private-owned business itself as having annual revenues of $3.4 billion and 30 thousand staff.