The well-known fast fashion retailer Forever 21 announced late Sunday that it has started “winding down” its U.S. operations and filed for bankruptcy for the second time in about six years, almost a month after it started liquidation sales at its U.S. sites.
Along with its website, all locations have started going-out-of-business sales. As the official winding down process gets underway, regular operations and sales will continue.
“While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward,” Chief Financial Officer Brad Sell stated, “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.”
For 236 locations, referred to as “Wave 1 locations,” which are allegedly the worst-performing locations, going-out-of-business sales started in the middle of February. The week of March 30 is when those locations will close. Before May 1, the remaining 118 locations, often known as “Wave 2 locations,” will close.
The validity of gift cards will last till April 15.
At its peak, Forever 21 had at least 800 stores across the globe, generated $4 billion in revenue annually, and employed 43,000 people. After declaring bankruptcy for the first time in 2019, that number fell to 500 sites globally. The company’s remaining 354 U.S. stores will permanently close if it cannot find a buyer in the upcoming weeks.
California had more Forever 21 locations than any other state, with 67 as of January 2024. The bankruptcy case will not impact its foreign sites or its international e-commerce company.
Court filings state that the corporation owes about $1.6 billion and that, as of March 16, its assets were estimated to be worth between $100 million and $500 million.
“On behalf of the Company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to our customers,” Sell stated. “We are also grateful for the many years of support from our partners and our loyal customers, who have allowed us to serve as a fashion industry leader and go-to retailer for generations.”
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The Los Angeles-based business was first established in 1984 as Fashion 21, a 900-square-foot store in California. The business swiftly grew throughout the United States in the late 1980s and early 1990s before entering foreign markets.
During this expansion phase, Forever 21 transformed from a little shop into a well-known brand in “fast fashion,” drawing a wide range of consumers with its stylish, reasonably priced apparel and quickly shifting stock.
The corporation cited difficulties related to the record increase in inflation starting in 2021, according to court documents.
Temu and Shein, the company’s most prominent online rivals, benefit from the “de minimis exemption,” which exempts anything under $800 from import taxes and tariffs and permits drastically reduced product pricing. Retailers must pay these fees, though, therefore their prices are greater than others’.
