Can Forever 21 come back from bankruptcy?
It’s official. After months of rumors, Forever 21 has filed for Chapter 11 bankruptcy protection and announced plans to close up to 350 stores worldwide including 178 in the U.S. The fast-fashion retailer currently has 815 stores total.
In announcing its plans, Forever 21 said it was being supported by “dozens” of vendors. The retailer also announced that it has obtained funding from JPMorgan Chase Bank and TPG Sixth Street Partners to help it in restructuring its business. The retailer pledged to continue operating business as usual and that it would honor all gift cards, returns, etc.
Simon Property Group and Brookfield Properties (owed $13.4 million collectively) and FedEx (owed $3.4 million) topped the list of landlords and vendors that Forever 21 is seeking to repay, according to a Washington Post report.
While some believe that Forever 21’s clothing grew out of favor in an environment where consumers are eschewing disposable fashion and gravitating towards second-hand clothing, others simply see a company that grew too fast, too soon.
Over the years, Forever 21 has often zigged when other retailers have zagged. Back in 2010, when many retailers were moving into smaller format stores, Forever 21 announced it was going big with locations that were up to nine-times larger than those it had operated up to that time. It also embarked on an expansion overseas in Asia and Europe. With its Chapter 11 filing, Forever 21 announced that it would be exiting many of the markets where it has opened stores in recent years.
“[There were] too many stores in too many increasingly weak malls that were increasingly larger in size than Forever 21 could productively manage,” Mark Cohen, director of retail studies and adjunct professor at Columbia University’s Graduate School of Business, told NBC News. “Taking advantage of a surplus of cheap oversize real estate lead them to begin to merchandise categories in which they had little to no expertise.”
- Forever 21, Inc. To Implement Global Restructuring to Focus on Profitable Footprint – Forever 21, Inc./Business Wire
- Forever 21 files for bankruptcy, will close 350 stores worldwide amid restructuring – The Washington Post
- Forever 21’s business model was way out of fashion – NBC News
- Forever 21 Thinks Big – RetailWire
DISCUSSION QUESTIONS: What will be the keys to Forever 21 turning its business around? Do you think the chain is more likely to succeed or fail in the attempt?