Forever 21 files for bankruptcy protection for the second time, will close all stores.

This week on Monday (17th), Los Angeles-based fast fashion retailer “Forever 21” applied for bankruptcy protection for the second time; if no one takes over, all stores will be permanently closed. The company stated that this situation is mainly attributed to the impact brought by Chinese fast fashion companies exporting cheap goods using small parcel duty-free policy.

In a press release on the 16th, Chief Financial Officer Brad Sell stated, “After completing a strategic assessment and careful consideration, we have decided to file for bankruptcy protection to implement a court-supervised marketing process and orderly wind down operations without continuing business transactions.”

“Forever 21” announced the closure of all 200 stores in the U.S. last month and will now close the remaining approximately 350 stores, leaving around 9,600 employees unemployed. The company’s bankruptcy debt is around $1.58 billion, including an expected loss of $180 million this year and a $150 million loss from last year.

In 1984, Korean immigrants Do Won Chang and Jin Sook Chang founded “Fashion 21,” later renamed as its current name. The company sold clearance-priced women’s, men’s, children’s clothing, accessories, and more directly from manufacturers, with sales reaching $700,000 in the first year. Over the first decade, the company opened a new store every six months on average. In 2005, “Forever 21” acquired the teenage clothing chain Gadzooks for $33 million, expanding its store count to 400 within two years, with sales increasing from $640 million to $1 billion.

The company has been family-owned, with over 800 stores globally at its peak in 2015, generating $4.4 billion in sales. However, business declined after 2018, with a 32% global sales drop in 2019, leading to the first bankruptcy filing in September. In February 2020, several companies jointly acquired the company’s assets and intellectual property but failed to halt its decline.

Sell thanked the dedicated employees and long-time partners on behalf of the company, stating, “We will strive to minimize the impact on employees, customers, suppliers, and other stakeholders.”

“Given the competition from foreign fast fashion companies, we could not find a sustainable path; these companies were able to undercut our brand in pricing and profitability by utilizing the ‘de minimis exemption’ policy,” he said in the press release. “Rising costs, economic challenges, and changing consumer trends led to our bankruptcy.”

Recently, multiple brands have announced the closure of retail chain stores, reaching the highest level since the COVID-19 pandemic began in 2020. The rise of e-commerce, the pandemic, and related lockdown measures have significantly altered consumer habits. According to the retail and technology-focused research consulting firm Coresight Research via Business Wire, up to 15,000 stores in the U.S. may close this year, double the number from last year when 7,325 stores closed.

On the 25th of last month, fabric and craft retailer Joann applied for bankruptcy protection for the second time. In a statement in January, the company cited continued weak sales and severe inventory issues as reasons for the re-application. Previously, after declaring bankruptcy in March last year, Joann retained 800 stores, which will now all be closed, resulting in around 19,000 employees losing their jobs.

On January 9th, department store chain Kohl’s announced the closure of 27 underperforming stores nationwide along with an e-commerce distribution center in San Bernardino County, Southern California, to avoid suffering the fate of Sears and JCPenney, which filed for bankruptcy last year and closed all stores.

Macy’s announced in January that it would close 66 stores as part of its “Bold New Chapter” strategy to close around 150 poorly performing stores by 2026 to focus on investing in new stores.

In December last year, Party City filed for bankruptcy, planning to close over 800 stores nationwide. During the pandemic, store closures everywhere led consumers to no longer rely on Party City for events like birthday parties or graduations, resulting in stagnant sales.

Earlier, in September last year, discount chain store Big Lots also filed for bankruptcy, potentially closing over 1,300 stores. By December, private equity firm Variety Wholesalers took over 200 of them and continued operating under the Big Lots name, while the rest of the stores are in the process of closing.

Customers can monitor and inquire about the closing statuses of these brands, especially those undergoing bankruptcy liquidation, to purchase affordable products before the stores shut down. ◇