Are Forever 21's Days Numbered? The Fast-Fashion Retailer Becomes the Latest to Eye Bankruptcy

Illustration for article titled Are Forever 21's Days Numbered? The Fast-Fashion Retailer Becomes the Latest to Eye Bankruptcy
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I have a justifiable dread about the state of retail stores in America, perhaps spurred on by the abandoned mall of my youth, a one-time mecca of teenage frisson overgrown with weeds and decay before finally being demolished. One of the inevitable caveats of Al Gore’s internet has been the demise of the brick-and-mortar location, as more and more of us (myself included) forego the store experience to get our fast fashion even faster.


The result? Real estate that no longer serves its intended purpose, and retailers saddled with debt as they scramble to keep up with the shifting shopping habits of their customers—often too late.

In the past year, we’ve seen luxury department store Henri Bendel end an era by closing its doors, and at the top of this month, upscale retailer Barneys New York, a retailer ironically known for featuring of-the-moment fashion and designers, filed for bankruptcy and closed several stores, hoping to attract a buyer to save its brand. And fast fashion isn’t faring much better. After scandal and poor sales rocked its revenue, Topshop closed all of its U.S. stores this spring. Now, millennial and Gen Z stalwart Forever 21 is eyeing a bankruptcy filing, after being saddled by debt and failing locations that are often anchor stores for major malls and retail blocks.

As reported by Business of Fashion:

The company has been in talks for additional financing and working with a team of advisers to help it restructure its debt, but negotiations with possible lenders have so far stalled, the people said. Focus has thus shifted toward securing a potential debtor-in-possession loan to take the company into Chapter 11, they said, even as some window remains to strike a last-minute deal that keeps it out of court...

A bankruptcy filing would help the company shed unprofitable stores and recapitalize the business, said the people, who requested anonymity discussing private negotiations. Yet it could also be problematic for the country’s major mall owners, including Simon Property Group Inc. and Brookfield Property Partners LP. Forever 21 is one of the biggest mall tenants still standing after a wave of bankruptcies in the retail sector.

The retailer currently has 800 stores across the US, Europe, Asia, and Latin America. BoF reports that fundraising and turnaround options have been limited in scope and so far unsuccessful, as co-founder Do Won Chang is intent on maintaining a controlling stake in the 35-year-old company.

Maiysha Kai is managing editor of The Glow Up, host of The Root Presents: It's Lit! podcast and Big Beauty Tuesdays, and your average Grammy-nominated goddess next door. May I borrow some sugar?



“ Do Won Chang is intent on maintaining a controlling stake in the 35-year-old company.”

Sorry Do, that’s not how bankruptcy works. If the company can’t pay its debts and this guy won’t voluntarily restructure, it will be forced into bankruptcy by its lenders. He’d do well to strike a deal that leaves him as CEO with some amount of go-forward equity. But no way that includes maintaining control.

It’s obvious that retail has become one of those industries that just doesn’t lend itself (haha) to using debt to finance the business, beyond short-term borrowings to manage inventory. Declining revenue and thin margins?  Not much to work with there.