The fall of Forever 21 may be a bad sign for shopping malls, which have been hit hard amid a string of high-profile closings by traditional retailers.
But it doesn’t necessarily signal the end for the fast-fashion brand itself.
Forever 21 Inc. says it plans to come back strong by leaning into the online shopping space where ecommerce brands like Fashion Nova and Revolve Group Inc. — some of the chain’s fiercest competitors — make all their revenue.
“A big turnaround is possible,” said Scott Stuart, chief executive of Turnaround Management Association. “I think as a restructuring strategy to try to create balance between ecommerce and the visibility of its stores nationwide is a positive in the current environment.”
In a move that had been anticipated for several weeks, Forever 21 filed for Chapter 11 bankruptcy protection on Sept. 29. The Lincoln Heights-based company cited a steep drop-off in mall traffic and problems stemming from its rapid international expansion as key reasons for the filing.
“This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” Executive Vice President Linda Chang, daughter of the company’s owners, said in a statement.
Family-run Forever 21 — which started in 1984 as a single store in Highland Park and became a retail phenomenon by selling cheap but trendy clothes — owes $347 million to vendors and has about $227 million in loans, according to Jonathan Goulding, the company’s restructuring officer.
Forever 21 expects to shutter as many as 350 stores worldwide, including up to 178 in the United States. The chain has 785 stores, with more than two dozen in Los Angeles County. The company said the restructuring will allow the chain to return to its core business.
At its peak, Forever 21 had $4.1 billion in annual sales and 43,000 workers. The rags-to-riches story of founders Do Won and Jin Sook Chang, a Korean immigrant couple, embodied the possibility of American entrepreneurism.
But the company was challenged by the shift toward online shopping and falling interest in fast fashion. Online retailers like Fashion Nova and Revolve cut into Forever 21’s customer base while interest among Generation Z and millennials in secondhand and vintage clothing made disposable fashion less appealing.
Then there was the chain’s weak digital strategy. Unlike its rivals, Forever 21 failed to successfully use social media to drive ecommerce.
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