The Rise Of Walmart And Target
Meanwhile, the fact is discount stores such as Walmart and Target have gotten way better at giving shoppers what they want in apparel. The products are usually on trend and at great prices. Remember, the very existence of mall-based specialty apparel shops like Forever 21 came to be because discounters and department stores couldnt sell good merchandise at fair prices.
No more. Plus, its the discounters with their large supply chains that are able to handle the rising worker wages in overseas markets and increased costs from tariffs. Fast-fashions business model has long been predicated on low prices because of low costs.
That is going away.
The strength you are seeing in the retail sector is at Target, Walmart, TJ Maxx. Really the retailers that are standalones like Forever 21 and small, mall-driven retailers, those are the ones struggling because mall traffic continues to erode. The discounters have larger businesses and could offset higher costs, said Nick Giacoumakis, strategist at New England Investment & Retirement Group.
The writing on the wall for Forever 21 has long been clear. You just had to connect the dots.
This story was originally published on Aug. 29, 2019 and updated with news of the bankruptcy filing on Sept. 30.
Forever 21 Has Faced Its Fair Share Of Controversy Over The Years
Forever 21 opened in 1984, earning $700,000 in sales during its first year of business, according to the company’s website. By 2010, the chain had 500 stores in the US alone, and became synonymous with the term “fast fashion,” meaning it sold inexpensive clothes that matched high-end runway trends.
After hitting a peak of 600 US storefronts in 2015, Forever 21 began to downsize in 2018, and Bloomberg reported that the company was looking to restructure in June.
Still, Forever 21’s demise began long before it started closing stores. In 2017, some customers became angered when the retailer sold T-shirts designed to look like army-training gear.
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In the following months, Forever 21 was also accused of stealing T-shirt designs from two smaller brands, Wildfang and Word.
Word claimed Forever 21 ripped off a T-shirt that had the word “woman” written in different languages, while Wildfang said the brand took its “wild feminist” slogan.
Most recently, the company was sued for $10 million by Ariana Grande, whose lawyers said the retailer hired “a look-alike model” and used audio and lyrics from her songs on social media to suggest she endorsed the brand.
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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Forever 21 Expanded Too Far Too Fast
At the height of Forever 21’s popularity, the company generated $4.4 billion in revenue, according to Business Insider. Around that time, the brand also began rapidly expanding. Time reported that, in just six years, Forever 21 went from having stores in seven countries to an impressive 47 countries. But all the while, the company ignored their biggest competition: online shopping. Just as the brand was working to quickly open more locations, e-commerce was taking off in a big way.
The choice to keep expanding in spite of heightened online competition helped lead Forever 21 into $500 million in debt, data from research firm Mintel provided to CBS News confirmed. “In order to get the business back on track, lenders would have to be willing to pump more money into it and this could be a hard sell,” Chana Baram, retail analyst at Mintel, explained in a statement. “Only time will tell what will happen, but these are certainly troubling times for the fast-fashion retailer.”
It Expected Things To Stay The Same Forever
Business leaders will tell you that one of the hardest things to do is make major changes to your business in anticipation of coming trends even though everything is going fine at the moment. Forever 21’s bankruptcy is a good illustration of why. One industry expert told the New York Times that the company had bet its future on the notion that the fast fashion industry of the next decade would be the same as the last decade and that the company would prosper if it had stores in the right locations and continued to generate interest with the fashion spinoffs it created. But today’s teenagers are more likely to buy second-hand items and to gravitate toward brands that can point to sustainability or environmental concern as a plus. That’s something Zara has done–when Greenpeace called the company out for toxins in its clothing, it pledged to remove them.
Perhaps a few changes to keep pace with evolving attitudes and priorities among young people might have helped Forever 21 avoid needing bankruptcy protection. Unfortunately, we’ll never know.
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Forever 21 Files For Bankruptcy: 5 Things To Know About The Fashion Chain’s Founders
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Fast-fashion chain Forever 21 filed for bankruptcy on Sunday , joining a list of brick-and-mortar retailers that have shuttered amid competition from online stores and changing shopping trends.
Founded in Los Angeles 1984 by a husband-and-wife team who immigrated from South Korea, the company expects to close up to 350 stores worldwide. These include up to 180 stores in the United States and most of the chain’s outlets in Asia and Europe.
Forever 21 currently has some 800 stores globally.
There is now only one remaining store here, at 313@Somerset. Staff The Straits Times interviewed were aware of the news but said that the Singapore store is not closing.
Here are five things to know about the privately held retailer’s founders, Mr Do Won Chang and Mrs Jin Sook Chang, and their family-run business:
1. STARTING FROM SCRATCH
Mr Chang and his wife immigrated to California from South Korea in 1981, when he was 18.
When he was working at a Los Angeles petrol station, Mr Chang noticed the most expensive cars were driven by fashion retailers. He opened his first shop three years later, blocks away from the couple’s one-bedroom flat where they eventually brought up their daughters. Sales climbed from US$35,000 to US$700,000 in the first year.
“I feel truly blessed by Forever 21’s success. Forever 21 is my American Dream,” he told The Guardian in a 2011 interview.
2. A FAMILY AFFAIR
3. FORMER BILLIONAIRES
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Stores range in size from 10,000 square feet to 30,000 square feet. Theres 411 units, including Cross County, but Kulle believes its not enough. There were 550 stores in 2019, pre-bankruptcy, he said, adding that 411 is too few. There are pockets of opportunity out there.
Forever 21, which was purchased out of bankruptcy by Authentic Brands Group, David Simon, CEO of mall operator Simon Property Group SPG , and Brookfield Property Partners, sees opportunity in international expansion, which is being spearheaded by ABG.
The retailer, which was founded in 1994 by Do Won Chang and his wife Jin Sook, rapidly expanded with fast fashion at low prices, but an aggressive international push stressed its supply chain.
Forever 21 will convert current owned store operations in Central America, South America, Mexico, the Philippines and the Caribbean to a licensed partnership model.
Theres a lot of room to grow, particularly in Eastern and Western Europe and Southeast Asia, specifically China which remains largely untapped, said Nick Woodhouse, president and chief marketing officer at ABG, adding that the Middle East and India are also attractive regions.
At this store, we have a very value-driven customer, said Kulle. We have a sale room here. We have a very strong back-to-school business and a strong mens customer in Yonkers.
We focus on and cater to such a wide audience, were trying to get market share from everyone, Kulle said.
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This Story Is Part Of A Group Of Stories Called
Four months after Forever 21 filed for bankruptcy in September, the company will likely be sold for $81 million to licensing company Authentic Brands Group and retail property landlords Simon and Brookfield, according to a bankruptcy court filing.
Forever 21 is requesting court approval to name the three companies as the lead stalking horse bidders of a court-supervised bankruptcy auction. This means Authentic Brands, Simon, and Brookfield have set the lowest initial bid $81 million on the retailer, although rival bidders can make a higher counteroffer for Forever 21s assets.
The fast-fashion retailer which operates around 800 stores worldwide with more than $3 billion in estimated annual sales had faced months-long speculation about its plan to pursue a Chapter 11 filing in September. The company was reportedly in talks with advisers and lenders to restructure its debt in June, and had discussed a pre-bankruptcy deal with Simon and Brookfield, but plans fell through shortly before the Chapter 11 filing. It will reportedly close up to 178 stores in the US and up to 350 overall, according to the New York Times, and cease operations in 40 countries.
The days of Forever 21, with its strong brick-and-mortar presence, have been numbered, thanks to the retail apocalypse, a threatening term used to describe how the internet changed consumers shopping habits, particularly affecting chain stores.
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Even If Forever 21 Were To Make Major Changes To Its Business I Can’t Say I’d Return As A Loyal Shopper I’ve Recently Discovered A Love For Thrifting And I’m Not The Only One
About a year ago, my sister asked me to join her on a trip to a thrift store. While I was first taken aback by the shop’s musty smell, I quickly realized that many racks were filled with brand new clothing that still had tags on them. On my first trip, I purchased new jeans from Zara and an unworn sweater from Lucky Brand.
I was immediately hooked on thrift shopping, and haven’t stopped since. While I personally choose to avoid buying some things secondhand like undergarments and bathing suits I find that thrift stores are overall worth the effort.
Not only do I feel better knowing that I’m not constantly contributing to the churn of fast fashion, but I’d also estimate that I’ve saved hundreds of dollars on clothes over the past year.
I’m not the only one who’s had this realization recently.
According to The Cut, thrifting apps like Depop are currently all the rage among millennial and Gen Z shoppers. While many use the app in place of online shops from major retailers, others have made careers practically from their bedrooms. To do so, users commonly purchase inexpensive clothing from thrift shops and then sell the pieces for higher prices on the app.
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Forever 21 Got Caught Up In Controversy
Just a few weeks before Forever 21 filed for bankruptcy, singer Ariana Grande sued the fast fashion retailer Forever 21 for using her “name, image, likeness and music” without her permission, according to court records cited by Fox Business. Forever 21 first attempted to reach an endorsement deal with the singer, but Grande passed on the offer “due to Forever 21’s unwillingness to pay the fair market value for a celebrity of Ms. Grande’s stature.” The lawsuit claimed that Forever 21 then used Grande’s likeness by “hiring a look-a-like model and posting photos of that model” instead.
Ariana Grande fans may have been miffed by Forever 21’s decision, but the consequences of the controversy likely far outreached just admirers of the singer. American shoppers want to shop with brands they can trust. A Sprout Social survey revealed that 86 percent of American consumers find “transparency from business” to be “more important than ever before.”
Ultimately The Closure Of Some Forever 21 Stores Might Make Others Rethink Their Shopping Habits
At the end of the day, Forever 21’s bankruptcy filing isn’t necessarily good news. Hundreds of employees are sure to be laid off as the company restructures and closes 178 stores in the US alone. I’ve learned from experience just how devastating this can be.
In 2018, Toys R Us folded, leaving me and more than 30,000 other employees without jobs. I can only imagine that many of Forever 21’s employees will soon face struggles similar to what I experienced, as well as difficulties that I can’t comprehend.
Thankfully for some of the brand’s employees, some Forever 21 stores will remain open. The company will also not be shuttering as a whole.
What Forever 21’s bankruptcy announcement actually shows is a shift within the fashion industry. It proves that the brand’s target audience teens and young adults isn’t easily swayed by the promise of trendy clothes at affordable prices.
People no longer view fast fashion as an acceptable practice, and I’d have to agree.
Representatives for Forever 21 did not immediately respond to Insider’s request for comment.
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Nothing Lasts Forever 21 Discovers As Another Clothing Chain Files For Bankruptcy
Forever 21 was founded by Korean immigrants in Los Angeles more than 30 years ago and, until now, has described itself as a “family-owned business.” It enjoyed rapid expansion in the 2000s but has struggled as mall customers have dwindled. Other companies that were common sights in malls during the 1990s and 2000s such as Wet Seal and American Apparel have faced similar struggles.
“Consumers are not spending like they used to, and that has made things more competitive,” NPR’s Planet Money recently reported. “And in this more competitive environment, Forever 21 has been losing ground to the new crop of online retailers companies like boohoo, ASOS, Revolve and Lulus.”
ABG and Simon will each own 37.5% of the company’s intellectual property and operating businesses, while Brookfield will own 25%. The new owners plan to keep the company’s headquarters in LA.
ABG says it plans to seek out young customers “by introducing refreshed creative, targeted digital campaigns, and influential collaborations.”
Correction Feb. 20, 2020
A previous version of this story incorrectly said the acquisition announcement was made on Thursday. It was made Wednesday.
Forever 21 Files For Bankruptcy No Plans To Close Singapore Store
A Forever 21 store stands in Union Square in Manhattan on Sep 12, 2019 in New York City.
LOS ANGELES: Fast-fashion retailer Forever 21 Inc filed for bankruptcy late on Sunday , joining a growing list of brick-and-mortar companies that have succumbed to the onslaught of online sellers such as Amazon.com Inc and ever-changing fashion trends.
Forever 21, which popularised trendy and inexpensive clothing, has fallen out of favour with shoppers due to strong competition from other retailers such as H& M and Zara.
Adding to its problems, younger and more environmentally conscious shoppers are now choosing brands that ethically source garments instead of retailers that use cheap fabrics to make T-shirts that are snapped up for US$5.
“The brand has lost much of the excitement and oomph, which is critical to driving footfall and sales,” said Neil Saunders, managing director of retail research firm GlobalData Retail.
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Forever 21 Has Officially Filed For Bankruptcy
Forever 21’s financial woes have entered a new chapter. On Sunday, the fast fashion retailer issued a letter to its customers announcing that the company would officially file for bankruptcy. Reports that the brand would file began in late August when rumors loomed that the company was contemplating a debtor-in-possession loan.
Forever 21 did end up filing for Chapter 11, which is reportedly less extreme than a Chapter 7 filing and will allow business operations to resume while the company strategizes. “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,” the brand’s letter to consumers read.
However, per The New York Times, the bankruptcy will end operations in 40 countries, including Canada and Japan. It will also shutter 178 US stores and 350 globally. In documents filed in U.S. Bankruptcy Court and obtained by NBC News, Forever 21 Inc. claimed it had liabilities between $1 billion and $10 billion owed to more than 100,000 creditors.
The latest hurdle for Forever 21 comes after a rocky 2019 for the retailer. At the start of September, Ariana Grande reportedly sued the company for $10 million for using her name, likeness, and lyrics from “7 Rings” to promote merchandise. In July, controversy arose when customers who ordered plus-size clothing online were sent diet bars with their orders.
