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Forever 21 Prepares for Potential Bankruptcy Filing

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According to a Bloomberg report published on Tuesday, August 28th, US-based fast-fashion retailer Forever 21 is preparing for a potential bankruptcy filing. As the company’s recent talks for additional financing and debt restructuring have reportedly stalled, Forever 21 is now looking to a potential bankruptcy filing to recapitalize its business and shed unprofitable stores in the midst of a rapidly evolving retail environment.

Forever 21 was founded by couple Jin Sook and Do Won Chang in 1984 in Los Angeles, California. The company enjoyed strong growth since its founding, especially during the period of peak fast-fashion demand throughout 2005-2015. As one of the pioneers of fast-fashion, Forever 21 led the apparel and footwear market in the US and expanded throughout Europe, Asia, and Latin America.

The retail environment has seen dramatic changes in recent years, with internet retailing growth accelerating since 2010. Like other apparel and footwear specialist retailers largely dependent on physical retail stores, Forever 21 has suffered as shopping centers and retail corridors have faced declining foot traffic as a result of consumers’ migration towards online shopping.

The rise of internet retailing brought increased competition for Forever 21, with newer players including Boohoo, ASOS, Tobi, and SHEIN offering trend-driven clothing at affordable prices online. These internet-based fast-fashion retailers offered the convenience of free shipping and returns, appealing to many tech-savvy young consumers and further reducing their need to visit physical retail stores to purchase fast fashion.

Declining foot traffic to retail stores and increased competition from online players lead sales to fall at Forever 21. Furthermore, as consumers’ expectations for fast fashion increased, Forever 21 had trouble keeping up with the constant demand for new styles. As a result, the brand struggled with excess inventory, which had to be heavily discounted for a significant loss of profit.

Forever 21 is not the only fast-fashion retailer that has struggled since 2015, with a number of apparel and footwear specialist retailers having closed stores, laid-off staff and filed for bankruptcy. Topshop announced the closure of its 11 US stores in 2019, having already closed 200 stores in the UK over the last three years. Growth at H&M and Zara has also slowed in recent years, facing the same pressures of declining foot traffic and increased competition from online players.

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