The clothing chain Forever 21 will begin a series of mass layoffs in the United States, amid the closure of some of its stores in the country and the possibility of filing for bankruptcy. What will happen to the company? Here’s everything we know about it.
Why is Forever 21 laying off employees?
Through WARN notices sent to the Department of Employment Development, the company reported the layoff of nearly 700 workers at its California and Pennsylvania locations. Of these, 358 are corporate employees, and the rest work in stores that will permanently close in the coming weeks.
According to a spokesperson, the company continues to explore strategic options while also seeking ways to reduce costs in its operations and optimize store space.
Forever 21 stores are closing
The company confirmed the closure of its operational headquarters in Los Angeles. Additionally, local media in California and Washington have reported that some branches have already started to close, although the company has not made an official announcement yet.
Forever 21 may file for bankruptcy
Five years ago, in 2020, Forever 21 was on the brink of bankruptcy. However, it managed to overcome the crisis thanks to a strategic alliance with Simon Property Group, Brookfield Corporation, and Authentic Brands Group, which allowed it to continue operating. Now, the company is once again facing the possibility of bankruptcy due to its current financial problems.
So far, the company has not filed for Chapter 11 of the U.S. Bankruptcy Code. According to company reports, the management is working with a restructuring advisor, with the goal of finding a new buyer to help avoid bankruptcy.
One of the main causes of Forever 21’s crisis is the fierce competition from Chinese online discount retailers, such as Temu and Shein. In 2023, the brand tried to partner with Shein, but this collaboration has not achieved the expected success.
Currently, Catalyst, a joint venture between Sparc Group and JC Penney, is the parent company of several brands, including JC Penney, Aéropostale, Brooks Brothers, Eddie Bauer, Nautica, Lucky Brand, and, more recently, Forever 21.
The History of Forever 21
In 1981, Jin Sook and Do Won “Don” Chang, two South Korean immigrants with limited resources and no formal education, arrived in the United States with the hope of achieving the American dream. To make ends meet, Jin Sook worked as a hairdresser, while Don took on various jobs as a janitor, barista, and gas station attendant. During this time, Don observed the success of entrepreneurs in the fashion industry, which inspired him to start his own business.
With only $11,000 in capital, they opened a 900-square-foot clothing store, initially called Fashion 21. Their strategy was to take advantage of wholesale liquidations, which allowed them to offer fashionable clothing at affordable prices. In their first year, Fashion 21 achieved sales of $700,000.
Although Fashion 21 initially catered primarily to the Korean-American community in Los Angeles, the Changs quickly expanded their business, opening new stores every six months. With the growing success of the brand, they decided to rename it Forever 21, to reflect their vision of offering affordable fashion to anyone who wanted to look young, modern, and fresh.
Forever 21’s success was built on a simple but effective strategy: offering fashion at low prices, which made the brand a leading name in the fast fashion industry and a pioneer in the sector.
