After filing for bankruptcy with the U.S. Bankruptcy Court for the District of Delaware last Sunday, Forever 21 is preparing to close all of its stores in the country. The company has set a closure date; if you’re a customer, we’ll give you all the details to help you prepare.
When will all Forever 21 stores in the U.S. close?
According to the company, all locations housing the more than 350 stores of the retail chain must be vacated by May 1. However, many will close before April 1, so closures have already begun in some states.
“On behalf of the company, I want to express our deep gratitude for the hard work of our dedicated employees and their commitment to our customers. We also appreciate the many years of support from our partners and loyal customers, who have allowed us to be leaders in the fashion industry and a go-to store for generations,” said Brad Sell, CFO of F21 OpCo, in a statement.
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Why did Forever 21 file for bankruptcy?
This is the second time the company has filed for bankruptcy; the first was in 2019. Authentic Brands, the owner of the Forever 21 brand and intellectual property, and shopping mall owners Simon Property Group and Brookfield Corporation saved the fast-fashion retailer from that bankruptcy.
On Sunday, March 16, the company filed for bankruptcy again with the U.S. Bankruptcy Court for the District of Delaware, blaming this on competition from foreign fast-fashion companies, rising costs, economic challenges, and the evolution of consumer trends.
According to the company, another factor contributing to the drop in sales is the highly competitive retail environment due to the de minimis exemption, which exempts goods valued at less than $800 from import duties and tariffs.
“Some non-U.S. online retailers competing with F21 OpCo, such as Temu and Shein, have benefited from this exemption and, therefore, have been able to pass significant savings on to consumers. As a result, retailers that must pay duties and tariffs to purchase products for their stores and warehouses in the U.S., like F21 OpCo, have been harmed,” it stated.
What will happen to F21 OpCo?
The company stated that both its physical stores and online store will continue to operate normally until the aforementioned deadline. The company could only be saved from permanently closing its stores if a buyer emerges for its assets. To cover the wages of the employees at the remaining operating stores, it filed motions with the court, which will allow it to use cash collateral for salaries and benefits.
F21 OpCo 21 starts mass layoffs
Earlier this month, the clothing chain announced that it would begin a series of mass layoffs in the U.S. due to the closure of its stores. Through WARN notices sent to the Department of Employment Development, the company reported the layoff of nearly 700 workers in its California and Pennsylvania locations. Of these, 358 are corporate employees.
According to a spokesperson, the company continues to explore strategic options while simultaneously looking for ways to reduce costs in its operations and optimize store space.
History of Forever 21
In 1981, Jin Sook and Do Won “Don” Chang, two resourceful South Korean immigrants with no formal education, arrived in the United States with hopes of achieving the American Dream. To survive, Jin Sook worked as a stylist, while Don held various jobs, including janitor, barista, and gas station employee. During this time, Don was inspired by the success of entrepreneurs in the fashion industry, which motivated him to start his own business.
With only $11,000 in capital, they opened a 900-square-foot clothing store, initially named Fashion 21. Their strategy was to take advantage of wholesale liquidations, allowing them to offer trendy clothes at affordable prices. In their first year, Fashion 21 generated $700,000 in sales.
Although Fashion 21 initially focused on the Korean-American community in Los Angeles, the Changs quickly expanded their business, opening new stores every six months. Due to the brand’s growing success, they decided to change the name to Forever 21, reflecting their vision of providing affordable fashion for those who wanted to look young, modern, and fresh.
Forever 21’s success was cemented by a simple yet effective strategy: offering fashion at low prices, making the brand a leader in the fast-fashion industry and a pioneer in the sector.
