By Dorothy Ma and Eliza Ronalds-Hannon | Bloomberg
Forever 21’s US retail operator has filed for bankruptcy after being hit by rising inflation and intense competition in the fast-fashion sector, the second time the brand has entered Chapter 11.
Forever 21 stores, which have attracted droves of young women since the 1980s for its cheap, trendy clothing, were hurt by the rising cost of inventory and wages in recent years, its co-chief restructuring officer said in a filing to the US court.
Also see: Forever 21 closing more stores in Southern California
Competition from online retailers such as Temu and Shein also put pressure on the company.
With cost-saving initiatives failing to make up for significant losses, US operator F21 Opco filed for Chapter 11 bankruptcy in Delaware with around $1.58 billion in total funded debt, the filing said.
The Forever 21 trademark and intellectual property are owned by apparel and lifestyle label empire Authentic Brands, which licenses them to the operating company that would undergo a Chapter 11 process. Authentic will continue to own the IP and may license the brand to other operators, according to a statement Sunday.
Related: Forever 21 laying off 358 employees as it closes L.A. headquarters
Forever 21’s locations outside of the United States are operated by other licensees and aren’t included in the filings.
Pivoting away
The Chapter 11 filing comes as US firms Village Roadshow Entertainment Group and Brightmark Plastics Renewal also filed for bankruptcy protection, and follows a tumultuous week for markets rocked by President Donald Trump’s escalating trade wars.
Concern over the health of the economy drove high-yield corporate credit spreads to levels last seen in August, while a series of blue-chip borrowers postponed their debt sales.
The company plans to hold liquidation sales at its stores while conducting a court-supervised sales process for at least some of its assets, it said in the statement. In the event of a successful sale, Forever 21 may “pivot away” from a full wind-down of operations to allow a deal to take place that would see it continue as a going concern.
Second bankruptcy
It’s the clothing brand’s second stint with bankruptcy. Its first in 2019 was rife with fighting, left creditors little recovery and resulted in the closing of hundreds of locations it had during its heyday.
A group of buyers — including Simon Property Group, Brookfield Corp. and Authentic Brands — teamed up to buy Forever 21 out of bankruptcy through a venture called Sparc Group. That group partnered with Shein in 2023 as Forever 21 attempted to solve some of its operational issues.
US retail group JC Penney acquired Sparc in December to form Catalyst Brands, in a deal which saw its previous shareholders maintain minority stakes in the company. At the time of the merger, Catalyst said it was exploring strategic options for the operations of Forever 21.
In this weekend’s filing, Forever 21 pointed specifically to competition arising from foreign companies’ use of the ‘de minimis’ exemption, a loophole which allows retailers from abroad to ship low-value packages to the US without import duties and tariffs. President Donald Trump’s administration is looking at ways to halt that exemption.
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