Clothing chain Forever 21 is filing for Chapter 11 bankruptcy, according to a statement from the company. The company has not said how employees will be impacted, but it is planning to close nearly a quarter of its nearly 800 stores around the world. Information on which stores could close was not available.
The company, founded in 1984, said in its statement that it is not planning on going out of business. It stated, “Forever 21 (will) 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.” During the bankruptcy proceedings, gift cards will continue to be accepted, and all return and exchange policies will remain in effect.
The company said it would use the $350 million in financing it obtained in advance of its Chapter 11 filing to “right size its store base.” That apparently means closing as many as 178 of its more than 500 stores in the U.S. as well as most of those in Asia and Europe. The company plans to continue operating in Mexico and Latin America.
Forever 21’s financial troubles follow the falling popularity of fast fashion, or low-priced, cheaply made clothing that caters to teens and trends. Shoppers, particularly younger ones, have been gravitating away from spending much on clothes, preferring to spend on experiences and entertainment instead. But even as shopper trends started shifting towards a model that benefited smaller stores, Forever 21 went in on expanding the size of its brick-and-mortar footprint.
Real estate is likely to be a key focus of Forever 21’s restructuring. By rent, it is the seventh-largest tenant of mall owner Simon Property Group. The company said, “We have requested approval to close up to 178 stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords.”