I have Forever 21 I filed for bankruptcy protection For the first time in six years, he cited the fierce competition between online first fashion giants Shayne and Tem as a major factor in their financial struggle.
The retailer's operator is planning to close all US businesses, with liquidation sales already underway at over 350 locations. company He said it remains open to potential buyers. According to court filings, they are willing to acquire the inventory and continue to operate the store.
Efforts to protect buyers over the past few months have failed. Forever 21 reached out to more than 200 potential investors and signed 30 contract agreements, but no viable deals emerged.
The company was engaged in consultations with liquidators and faced major challenges in attracting buyers who wanted to keep their business up. According to CNBC.
The company's second month of bankruptcy continues in a turbulent era.
After coming out of its initial submission, Forever 21 faced economic turbulence due to the Covid-19 pandemic, inflationary pressures and increasing competition with newcomers Shein and Temu.
In court filings, Stephen Coulombe, the company's co-chief restructuring officer, attributes part of its financial issues to Temu's ability to exploit the scene and “minimum exemptions.”
A loophole in trade law allows imports under $800 to enter US tax exemptions.
“Certain non-US online retailers who compete with debtors such as Temu and Shein have been using this exemption, allowing consumers to pass significant savings,” Coulombe said in court documents.
“As a result, retailers such as companies that have to pay obligations and duties to purchase products from US stores and warehouses are undercut.”
Repeated calls from US companies and industry groups have been made to amend the exemption and create a fairer market, Coulombe noted.
President Donald Trump recently expressed his intention to eliminate loopholes.
Forever 21 operator SPARC Group has sought to counter Shein's influence by forming a partnership with the company in 2023.
However, the collaboration did not generate sufficient revenue to offset financial losses or lead to policy changes regarding the De Minimis exemption, Coulombe added.
“The ability of non-US retailers to sell their products to US consumers at significantly lower prices has had a major impact on the company's ability to maintain its traditional core customer base,” he explained.
Despite liquidation of US operations, the Forever 21 brand is expected to continue to live.
Its international store and online presence continues, and intellectual property owned by Authentic Brands Group (ABG) is not part of the bankruptcy proceedings.
“We are attracting a lot of interest from powerful brand operators and digital experts who share our vision and are ready to take our brand to the next level,” said Jarrod Weber, global president of ABG Lifestyle.
Forever 21 showed signs of recovery after its first bankruptcy acquisition by a consortium that included Authentic Brands Group, Simon Property Group and Brookfield Property Partners.
In 2021, the company generated $2 billion in revenue and $165 million in EBITDA or revenue before interest, tax, depreciation and amortization.
However, increasing competition, inflation and supply chain disruptions have led to poor financial performance.
Over the past three fiscal years, Forever 21 has suffered more than $400 million in 2024 alone, including $150 million. The forecast shows an additional EBITDA loss of $180 million through 2025.
Last year, ABG CEO Jamie Salter admitted in a meeting that winning the Forever 21 was “probably the biggest mistake I've made.”
The report later surfaced that the company called for a significant rent cut from landowners to reduce costs and avoid another bankruptcy filing.
These efforts resulted in $50 million in savings, but were ultimately not enough to offset the increase in losses.
Today, retailers owe $1.58 billion and more than $100 million to multiple clothing manufacturers across a range of loans based primarily in China and South Korea.
Since its founding in 1984, Forever 21 has been a major player in the first fashion industry.
At its peak, the brand boasted more than 43,000 employees and generated more than $4 billion in annual revenue.
