Fast-fashion giant Forever 21 files for bankruptcy again

Forever 21, the US-based fast-fashion retailer, has filed for Chapter 11 bankruptcy protection for the second time in six years.

The move comes as the company grapples with declining mall traffic, rising costs, and growing competition from online retailers.

In a statement released on Sunday, Forever 21 announced that it would begin liquidation sales across its US stores and continue a court-supervised process to sell its assets.

While the company has struggled to secure a buyer for its 350 US stores, its international operations remain unaffected, as they are managed by third-party licence holders.

The retailer, which was once a favourite of young shoppers for its affordable and trendy clothing, has been increasingly squeezed by the rise of e-commerce and competition from other fast-fashion giants such as Zara and H&M.

Founded in Los Angeles in 1984 by South Korean immigrants, Forever 21 once operated around 800 stores globally, with 500 of them in the US.

At its peak, it was a major force in the fast-fashion industry, but the decline of shopping malls and a shift in shopping habits have taken a toll on its business.

The company’s estimated assets range from $100 million to $500 million, while its liabilities are between $1 billion and $10 billion, according to court filings in the District of Delaware.

Carrying unsustainable debt, the company has been unable to adapt to the rapidly changing retail landscape. In an attempt to turn things around, Forever 21 has announced plans to pivot its operations if a successful sale of its assets occurs, which could save the brand from a full shutdown.

Despite these challenges, the company will continue to operate its US website and keep its stores open for now, though its future remains uncertain. The liquidation process is expected to affect its remaining store operations across the country.

Brad Sell, Chief Financial Officer of Forever 21, stated, “We have been unable to find a sustainable path forward, given competition from foreign fast-fashion companies, as well as rising costs and economic challenges impacting our core customers.”

Forever 21 was acquired out of bankruptcy in 2019 by a group of investors through a joint venture, and now finds itself back in financial distress. As the brand faces an uncertain future, the liquidation sales at its US stores will signal the end of an era for a once-dominant force in the fashion retail sector.