Forever 21 Became Too Much Of A Department Store
As Sonia Lapinsky, the managing director of the retail practice at AlixPartners LLP, noted, Forever 21 would have to start delivering “the right products” in order to bounce back from bankruptcy. That would likely mean scaling back their offerings. As Forever 21 expanded its number of stores across the world, the categories of products the brand offered also grew. The Los Angeles Times noted that it no longer just offered clothes for young women, but “expanded into menswear, children’s clothing, maternity and plus-size apparel and cosmetics, among other items.”
Although diversifying their products to attract more people may not have sounded like a bad idea at the time, it only further alienated their young consumers. Ilse Metchek, president of the California Fashion Association trade group, said today’s teenagers who are looking to buy fast fashion tend to already have an idea of what they want before they get to the store. As such, she said they “want to get in, they want to see it, they want to buy it and get the hell out of there. … They don’t want to go upstairs. It’s too much of a department store.”
Forever 21’s Bankrupt Shell May Stiff Creditors Of Us$200m
Jeremy Hill and Eliza Ronalds-Hannon, Bloomberg News
Closing down and sale signs sit in the widows of a Forever 21 Inc. store in London, U.K, on Thursday, Oct. 31, 2019. , Bloomberg
When Forever 21 Inc. sold itself out of bankruptcy this year, it left behind hundreds of millions of dollars in debt owed to suppliers, shippers and landlords. Now, as they seek to get repaid by the fast-fashion chains estate, its becoming clear that theyre in for some serious pain.
The U.S. Department of Justices bankruptcy watchdog is urging the judge overseeing the shell companys case to convert it to a Chapter 7 liquidation from a Chapter 11 reorganization, estimating that high-ranking creditors owed some US$250 million will likely only get 17 per cent of that money back, or less than US$50 million, according to court papers.
That puts Forever 21s case deep in the realm of so-called administrative insolvency, meaning the estate wont have enough money to fully pay bills it incurred in bankruptcy. The plight of Forever 21s creditors illustrates the risk of doing business with a bankrupt enterprise. Often painted as a controlled process, Chapter 11 bankruptcies can lead to significant losses if plans dont pan out.
Bankruptcy attorneys for Forever 21s estate didnt immediately respond to an email seeking comment.
A hearing on the attempt to convert the case to Chapter 7 is scheduled for Sept. 16 at 11:30 a.m.
The case is Forever 21 Inc., 19-12122, District of Delaware
Forever 21 Is Reportedly Filing For Bankruptcy And The Internet Is Divided About It
According to a new report, Forever 21 is filing for bankruptcy. Bloomberg is reporting that the companys financial struggles in recent years might force the Los Angeles-based retailer to change its business strategy, which might mean closing or restructuring unprofitable stores.
Forever 21 hasnt yet commented on the report, but the news comes amid a slew of mall favorites suffering the same fate, with stores like Toys R Us, Claires Accessories, and Payless all filing for bankruptcy in the past few years. As consumers shift to online shoppingthanks to fast shipping and a growing range of options at various price pointsretail culture as we once knew it is evolving, and the internet has thoughts.
For many of us, Forever 21 has been a one-stop shop for affordable fashion. But the company hasnt been without its fair share of controversy. Fast fashion in general is not the most sustainable way of shopping, potentially exploiting workers and the environment. So some Twitter users are pleased to see a step toward the end of fast fashion, while others are sad for some very valid reasons.
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The Quality Of Forever 21’s Products Took A Hit
Among the reasons Forever 21 is at risk of going under is the brand’s declining quality, Stacey Widlitz, president of SW Retail Advisors, told the Associated Press. And Widlitz isn’t the only one who has noticed this. Consumers have taken to social media to voice their frustrations with the brand’s clothing. “Forever 21’s quality trash,” one shopper tweeted. Another consumer noted the brand’s ” clothing and poor quality.”
In the company’s bankruptcy filing, Forever 21 itself even acknowledged its declining quality, according to CNBC. Although many think the company’s accelerated expansion is mostly responsible for causing its downfall, Bill Read, executive vice president of leasing, acquisitions, and business development at Retail Specialists in Birmingham, Ala., has a different opinion. “I think is more a victim of people not wanting their clothes to fall apart,” he told the publication. “But I think they can survive if they right-size the ship and keep their better stores.”
Forever 21 Could Still Be Forever
The odds may be stacked against Forever 21, but the company isn’t necessarily a goner. A study conducted by the International Council of Shopping Centers revealed that the majority of Generation Z shoppers prefer shopping in-store rather than online. “The more traditional retailers haven’t really thought about this particular generation as an attractive target. They haven’t really thought about what this group wants out of a shopping experience,” Neil Saunders, an analyst at GlobalData Retail, told Bloomberg.
Forever 21 also has quite the online presence which will come in handy for attracting the younger generation. In 2015, the fashion retailer was ranked as , but, at the time, the company was busy targeting millennials. However, Generation Z is actually even more likely to purchase something they see advertised on social media, the International Council of Shopping Centers study revealed.
It’s true that Forever 21 will need to make some big changes in order to bounce back from bankruptcy, but it could still live on indefinitely or, you know, forever.
Forever 21 Files For Bankruptcy Will Close 350 Stores Worldwide
After months of rumors that it would do so, Forever 21 has announced it has filed for Chapter 11 bankruptcy protection. The company made the announcement late Sunday night. The bankruptcy filing comes as brick-and-mortar fashion chains face increasing competition from online fashion retailers and dwindling foot traffic in shopping malls. In a statement, Forever 21 said:
Today, Forever 21, Inc. voluntarily filed for bankruptcy protection under chapter 11 of the U.S. Bankruptcy Code. Essentially this allows Forever 21 to continue to operate its stores as usual, while the Company takes positive steps to reorganize the business so we can return to profitability and refocus on delivering incredible styles and fashion you love for many years to come. This does NOT mean that we are going out of business on the contrary, filing for bankruptcy protection is a deliberate and decisive step to put us on a successful track for the future.
In addition to filing for bankruptcy, Forever 21 announced it will close 350 stores worldwide. Currently, the Los Angeles-based company has about 800 stores worldwide with 500 of those being in the U.S. According to the New York Times, Forever 21 will close 178 stores in the U.S., with the remaining 172 stores being closed located in other countries. Currently, the company employs about 32,800 people worldwide.
Forever 21 Has Filed For Bankruptcy
Last night Forever 21 filed for Chapter 11 bankruptcy. In a letter addressed to customers, dated September 29, the brand said that the filing will enable Forever 21 to continue to operate “as usual” while the company “takes positive steps to reorganize the business so we can return to profitability and refocus on delivering incredible styles and fashion you love for many years to come.”
The statement continued, “This does NOT mean that we are going out of business on the contrary, filing for bankruptcy protection is a deliberate and decisive step to put us on a successful track for the future.”
As part of the filing, the brand has requested approval to close many stores throughout the U.S.: “The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords. We do, however, expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S.”
But the The New York Times reported the brand will close up to 178 stores in the U.S. and “up to 350 overall.”
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Fast Fashion And The Competition
Forever 21 might be known for their quick-turning duplications, but they are not alone in the fast fashion world. Competitors such as H& M and Zara have vied for the same consumer base that wants trendy clothing at an affordable or low-cost price point. Popular London-based ecommerce brands like ASOS and Pretty Little Thing have also taken a swipe at profits with their lucrative celebrity collaborations.
The Instagram famous Los Angeles-based brand Fashion Nova has also given Forever 21 a run for its money with shameless knockoff business strategy that churns out replicated designs in less than 24 hours.
Forever 21 Files For Chapter 11 Bankruptcy Protection
Fashion retailer Forever 21 has filed for Chapter 11 bankruptcy protection in the US.
The company said it plans to “exit most international locations in Asia and Europe” but would continue to operate in Mexico and Latin America.
It expects to close up to 350 stores worldwide, a spokesperson said, including as many as 178 US stores.
Forever 21 sells inexpensive, trendy clothes and accessories, and competes against brands such as Zara and H& M.
But some analysts say the retailer, founded in 1984, has lost its way over the past five years, and fallen out of favour with young US shoppers looking for relatively cheap clothing.
The company has also, like many traditional retailers, struggled against rising competition from online rivals.
Chapter 11 protection postpones a US company’s obligations to its creditors, giving it time to reorganise its debts or sell parts of the business.
A Forever 21 spokesperson said the retailer expected to have between 450 and 500 stores globally after this process, down from its current total of about 800.
Forever 21 had announced last week that it would pull out of Japan by October due to “continued sluggish sales”.
The California-based firm has now said it is seeking to close up to 178 stores across the US. It is also closing its stores in Canada, but has provided few details on other markets.
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Why Did This Happen
There are several reasons.
In a statement, the company said it needs time to reposition the brand and global business to adapt to the current retail environment.
More people are shopping online, and only 16 per cent of Forever 21s sales were online, according to bankruptcy filings.
The chain also expanded very quickly in the last few years into very large spaces that were not sustainable, said Farla Efros, president of the HRC Retail Advisory.
Forever 21s initial success was in part thanks to its affordable merchandise, but that has ultimately been part of its undoing.
Forever 21 is also one of the first companies to specialize in fast fashion.
That means it was quickly taking runway looks and putting them in stores at very affordable prices.
For These Muscular Box Store Versions Of Fast Fashion Like The Primarks Or The H& m’s Of This World What Are They Seeing When They See A Forever 21 Go Belly Up Or Are They Just Waiting For The Ripples To Hit Them Now
I think they are scrambling and they’re trying to figure out how to not let that happen to them. You may see some shifts in policy and the way business is done. Already, H& M has been embracing the sustainability movement. They say by 2020 they’ll only be sourcing sustainable cotton. So, H& M is on the ball in trying to make their company somewhat greener but as long as their business model is based on volume, these companies will never be wholly sustainable. I think they’re now scratching their heads saying, “How are we going to tweak our business models so we don’t wind up like Forever 21?”
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Being In Malls Didn’t Help Forever 21
As part of Forever 21’s vast expansion plan, the brand increased its presence in shopping malls “even as foot traffic dwindled,” CBS News noted. “It also opened many big-box format stores, averaging about 38,000 square feet, despite the high overhead costs.”
Adding more locations to malls was certainly a risk and, unfortunately, one that did not pay off. “I expect store closures to accelerate in 2019, hitting some 12,000 by year end,” Deborah Weinswig, founder and CEO of retail research company Coresight, predicted when speaking to CNBC.
This doesn’t necessarily mean that malls will disappear, though. “I think this is a multiyear transition,” DJ Busch, an analyst at commercial real estate services firm Green Street Advisors, told the publication. “Cleanse out some of these retailers that lasted longer than they should have. … It’s going to be tough. Anyone who thinks otherwise is too optimistic. But it doesn’t mean this is a dead business. … It can continue to be a good business as underproductive go away, and the strong landlords invest.” While that may be good news for malls, it’s certainly not for Forever 21.
Popular Fashion Retailer Forever 21 Files For Chapter 11 Bankruptcy
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Low-price fashion chain Forever 21, a one-time hot destination for teen shoppers that fell victim of its own rapid expansion and changing consumer tastes, has filed for Chapter 11 bankruptcy protection.
The privately held company based in Los Angeles says it will close up to 178 stores. The company once had more than 800 stores in 57 countries.
Forever 21 joins Barneys New York and Diesel USA in a growing list of retailers seeking bankruptcy protection as they battle online competitors. Others like Payless ShoeSource and Charlotte Russe have shut down completely.
The numbers bear out the crisis facing traditional retailers. So far this year, publicly traded U.S. retailers have announced they will close 8,558 stores and open 3,446, according to the global research firm Coresight Research. That compares with 5,844 closures and 3,258 openings in all of 2018.
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Coresight estimates the store closures could number 12,000 by the end of 2019.
Forever 21 was founded in 1984 and, along with other so-called fast fashion chains like H& M and Zara, rode a wave of popularity among young customers that took off in the mid-1990s.
Their popularity grew during the Great Recession, when shoppers sought fashion bargains.
These trends are happening while discounters like Target have spruced up their fashion assortments, stealing away customers.
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Store Closures Outside The Us
Founded in 1984, the retailer has 815 stores in 57 countries.
Meanwhile, the company plans to close most of its international locations in Asia and Europe but will continue operations in Mexico and Latin America.
Last week, it said it would exit Japan and close all 14 stores at the end of October.
The company also said its Canadian subsidiary filed for bankruptcy and it plans to wind down the business, closing 44 stores in the country.
Forever 21 opened the first Australian store in 2014 in Brisbane’s CBD.
The company has since shut its three flagship stores in Australia.
“We are confident this is the right path for the long-term health of our business,” Forever 21 said.
“Once we complete a reorganisation, Forever 21 will be a stronger, more viable company that is better positioned to prosper for years to come.”
Craig Patterson Of The U Of A School Of Retailing Says Forever 21 Will Likely Be Forgotten
As youthful and ageless as Forever 21 appears, they couldnt stay forever young as their time in the Canadian market comes to a close.
The retailer filed for bankruptcy in the United States on September 29 and announced it would close all Canadian stores.
With the closure of Forever 21 stores and other fast fashion icons across Canada, we sat down with expert Craig Patterson director for the University of Alberta School of Retailing and retail analyst to discuss why its happening here in Canada, and what effect it has on the industry.
Responses have been edited for length and clarity.
The Gateway: In your opinion, why is Forever 21 closing its doors in Canada?
Patterson: It would have been difficult for Forever 21 to stay open the chain was not performing very well overall in Canada in terms of sales. I had been provided some of the sales numbers for stores in Canada and they were doing extremely poorly, to be honest. Some stores were doing under three million dollars a year. Even in good malls, they were doing less than two million dollars a year in sales. This might sound like a lot of money but when you look at the size of these stores, that might be what they were paying almost in rent. In other words, this was not a retailer that was very successful in Canada, or I suppose almost anywhere else, given how the company in the U.S. had to file for creditor protection as well.
What do you think this says about the world of fast fashion?
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