On March 16, the U.S. operating entity of the fast-fashion brand Forever 21 filed for Chapter 11 bankruptcy. According to documents submitted to the Delaware Bankruptcy Court, the company reported assets ranging from $100 million to $500 million, with liabilities estimated between $1 billion and $10 billion.
In its official press release, the company stated, “Through the PSA and the Chapter 11 proceedings, the Company will conduct liquidation sales at its stores while simultaneously conducting a court-supervised sale and marketing process for some or all of its assets.”
Second Bankruptcy Filing Following 2019
Forever 21 previously filed for bankruptcy in 2019, which led to the closure of numerous stores. The brand was later acquired by Sparc Group, a joint venture formed by Simon Property Group, Brookfield Corp., and Authentic Brands, in an effort to revitalize its business. However, changes in the economic landscape and shifts in consumer behavior presented ongoing challenges, once again pushing the company into financial distress.
In January 2024, Sparc Group merged with JCPenney, forming Catalyst Brands. At the time of its establishment, Catalyst Brands stated that it was “exploring strategic options for the operations of Forever 21.” However, the latest bankruptcy filing suggests that the brand is facing significant difficulties in sustaining its business.
The Decline of Shopping Malls and Online Competition
One of the major challenges Forever 21 faced was the decline of shopping malls in the U.S. In recent years, consumers have increasingly turned to online shopping, which has negatively impacted the brand’s mall-centric business model. Additionally, rising inflation has weakened consumer purchasing power, further straining the low-cost apparel market.
It is important to note that the bankruptcy filing only affects the company’s U.S. operations, while Forever 21 stores outside the U.S. will continue operating under licensing agreements and remain unaffected. Additionally, Forever 21’s trademark and intellectual property rights remain under the ownership of Authentic Brands, suggesting the possibility of the brand continuing in some form in the future.
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