Forever 21 files for bankruptcy as mall traffic dwindles

Forever 21 previously filed for bankruptcy in 2019

Forever 21’s US-operated company filed for Chapter 11 bankruptcy on March 16 for the second time in the last six years as mall traffic continues to dwindle and online shopping skyrockets.

The fast fashion retailer’s filing comes after the company was unable to find a buyer for its 359 stores nationwide.

The first-ever store opened in Highland Park, Los Angeles, 41 years ago under its former name, “Fashion 21.”

F21 OpCo, the retailer’s parent company and operator, cited overseas competitors as one factor in its bankruptcy filing.

“Following the conclusion of our strategic review and after careful deliberation, we made the decision to file for chapter 11 to implement a court-supervised marketing process to solicit a going concern transaction, and, in the absence of such an arrangement, an orderly wind down of operations,” Brad Sell, Chief Financial Officer of F21 OpCo, said in a statement published by Business Wire.

“While we have evaluated all options to best position the Company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies,” he continued. “Which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends.”

Forever 21 filed for Chapter 11 bankruptcy for the second time in the last six years after being unable to find a buy for its 359 stores nationwide (Reuters)

Customers will still be able to shop in-person and online for the time being until the company begins its closing process.

Forever 21 stores outside of the US are not under the same licensees and are therefore not affected by the Chapter 11 filing.

The trendy retail giant previously filed for bankruptcy in 2019 and shut down around 200 stores. However, the company was later bought by premiere mall and outlet operators Simon Property Group and Brookfield Properties, as well as the marketing conglomerate Authentic Brands Group for $81 million.

While the sale temporarily solved Forever 21’s operating issue, the company experienced increased financial woes when the Covid-19 pandemic halted all in-person shopping, forcing many stores to shut down. Retailers saw a spike in online shopping during this time, which only continued to gain traction in the years since stores were allowed to reopen.

In May 2024, Capital One Shopping Research predicted that up to 87 percent of malls may close in the next decade. What’s more, the research also found that the nationwide mall vacancy rate was “110% higher than the overall average retail vacancy rate” that year.

“Malls had an 8.6% vacancy rate at the end of 2023,” according to Capital One’s findings.

Last year, a financial source speaking to CNBC suggested that Forever 21 was facing significant competition from cheap, online-only brands such as Shein and Temu.

“The speed is almost impossible to compete with,” the sources told the outlet. “So if you juxtapose any brand that was around 20 years ago to these new, on-demand manufacturing fast-fashion companies … it’s like comparing a mobile phone from 2000 to the newest iPhone. The speed, the quality, everything is just different.

“As soon as someone goes viral in a new outfit on TikTok, Shein is immediately making it and no regular brand can keep up with that,” they continued.