Forever 21, the once-popular fast fashion brand, has filed for bankruptcy protection again, just six years after its first filing. The company blames tough competition from online retailers like Shein and Temu for its financial problems.
With more than 350 stores still open across the U.S., the brand is holding liquidation sales and looking for potential buyers to help save its business.
Why Did Forever 21 Go Bankrupt?
Forever 21’s U.S. operating company, F21 OpCo, filed for Chapter 11 bankruptcy on Sunday after failing to find a buyer for its stores. The decision comes as fewer people shop in malls and more turn to online retailers offering cheaper options.
A Struggling Brand for Years
The brand’s troubles started long before this bankruptcy. In September 2019, Forever 21 first filed for bankruptcy and closed over 150 of its 534 stores. At its peak, the company had around 800 stores worldwide, including 500 in the U.S.
The COVID-19 pandemic, rising inflation, and shifting consumer preferences however made things even harder for the business.
Mass Store Closures and Liquidation Sales
Forever 21 has started liquidation sales in its remaining stores as part of its restructuring plan. Court documents show that the company approached over 200 potential buyers, and 30 signed confidentiality agreements, but no deal worked out.
Now, the retailer plans to close many of its stores, with reports suggesting that up to 200 locations may shut down during the bankruptcy process.
Forever 21’s Global Presence Will Continue
Despite these closures, Forever 21’s U.S. website and international operations will continue as usual. Authentic Brands Group, which bought the company after its first bankruptcy in 2019, still owns the brand.
The current bankruptcy does not affect its intellectual property or international business, leaving room for a possible comeback under new management.
How Shein and Temu Contributed to Forever 21’s Fall
Forever 21’s bankruptcy filing shows the growing challenges traditional retailers face from online competitors. Shein and Temu, two Chinese-founded online stores, have shaken up the market by selling trendy clothes at much lower prices.
One big advantage for these platforms is a U.S. trade law loophole called the “de minimis exemption,” which lets them import goods under $800 without paying import duties.
Unfair Competition in the Retail Industry
In court filings, Forever 21’s co-chief restructuring officer, Stephen Coulombe, pointed out that the loophole in trade law has hurt U.S. retailers, who have to pay duties and tariffs on their inventory.
Coulombe added that despite repeated requests for changes, the U.S. government has not taken action to create fair competition for local businesses.
Failed Attempts to Save the Brand
Forever 21’s owner, Sparc Group, tried to compete with Shein by partnering with the online retailer in 2023. However, the deal didn’t help turn the company’s finances around.
Jamie Salter, CEO of Authentic Brands Group, admitted that buying Forever 21 was one of his “biggest mistakes,” as reviving the brand has been difficult due to changing market trends.
Massive Financial Losses
The company has suffered huge financial losses. In 2021, Forever 21 made $2 billion in revenue and $165 million in EBITDA (earnings before interest, taxes, depreciation, and amortization). But in the last three years, it has lost over $400 million, and it expects to lose another $180 million in 2025.
Last Chance for U.S. Shoppers
Forever 21’s U.S. operating company is shutting down, but the brand itself isn’t going away completely. Its international stores will stay open, and Authentic Brands Group is looking for new operators to keep the business running.
Jarrod Weber, the global president of lifestyle at Authentic Brands Group, remains hopeful about the brand’s future, saying they have strong interest from potential partners who want to help revive it.
For U.S. shoppers, though, Forever 21’s physical stores might not be around much longer. As liquidation sales continue, customers have a final chance to shop before the brand’s stores possibly disappear from the American retail scene.