Introduction to Forever21’s Bankruptcy
Forever21, one of the most beloved and popular mall stores of the 1990s and early 2000s hinted at a "refresh" in a recent Instagram post, months after holding hundreds of "store closing" sales and declaring bankruptcy for a second time.
Background on Bankruptcy Filing
Earlier this year, F21OpCo, which runs Forever21 stores, said it was winding U.S. down operations under Chapter 11 bankruptcy protection while deciding whether it would continue as a business with a partner, or sell some or all of its assets.
Store Operations Amidst Bankruptcy
Though the brand in March said its stores and website would remain open while it searched a last-minute bidder, "store closing" signs hung in Forever21 shops across the country.
Update on the Company’s Future
Months later, on May 30, the fast-fashion store posted an Instagram message to its customers about the future. "Hey Forever 21 Fam," the message began, surrounded by hearts. "We know there’s been some buzz, and we want to clear things up. Forever21 isn’t going anywhere and we are still committed to bringing you the styles you love. Right now, we’re evolving, refreshing and building what’s next." "We get that change can feel unexpected," the message went on to say, "but we’re excited for what’s ahead, and we’ll be sharing more with you soon. Thanks for sticking with us, you’re the heart of everything we do."
Reactions from Former Employees
Dozens of comments on the Instagram post appeared to be from former employees, inquiring about jobs lost after being laid off.
History of Forever21
Founded in 1984 by Korean immigrants in California, Forever 21 grew to $1 billion in annual sales by 2005. The store quickly became a mall staple for millennials looking for designer-inspired styles, alongside fellow low-cost retailer H&M and the pricier Abercrombie & Fitch. Forever 21’s sales peaked at more than $4 billion a decade later, and founders Jin Sook and Do Won "Don" Chang were estimated to hold a combined net worth of $5.9 billion.
Challenges Faced by the Company
Yet as the 2010s wore on, the brand began to be eclipsed by online rivals, including ultra-cheap fast-fashion retailers like Shein that shipped their garments to U.S. customers from overseas. In this environment, Forever 21’s reliance on foot traffic at malls began to prove a liability as customers increasingly leaned into e-commerce. Forever 21 filed for bankruptcy for the first time in 2019, hoping to become a more efficient operation. But the Covid-19 pandemic only accelerated the company’s woes, even as it was bought out of bankruptcy by Authentic Brands, the operator of other major retailers and two major mall operators.
Financial Situation
In a 2024 interview, the CEO of Authentic called the purchase of Forever 21 "probably the biggest mistake I made." In its latest bankruptcy filing, Forever 21 listed assets of between $100 million and $500 million and liabilities of $1 billion to $10 billion.
Conclusion
Forever21’s journey from a beloved mall store to facing bankruptcy twice highlights the challenges faced by brick-and-mortar stores in the era of e-commerce. Despite the company’s efforts to evolve and refresh its brand, the road to recovery seems long and uncertain.
FAQs
- Q: What is happening to Forever21?
A: Forever21 is undergoing a restructuring process after filing for bankruptcy for the second time. The company is evolving and refreshing its brand. - Q: Will Forever21 stores close?
A: While some stores have already closed, the company has stated that it is committed to bringing its styles to customers and is working on what’s next. - Q: What led to Forever21’s bankruptcy?
A: Forever21 faced challenges from online rivals, a decline in foot traffic at malls, and the impact of the Covid-19 pandemic. - Q: What is the current financial situation of Forever21?
A: Forever21 has listed assets of between $100 million and $500 million and liabilities of $1 billion to $10 billion in its latest bankruptcy filing.
