Forever 21, the clothing emporium that was a rage among the teens until recently, has announced that they have filed for bankruptcy. The chain will be pulling down the shutters on 300 to 350 stores across the world including 178 in the United States.
Forever 21 has 549 stores operating in the US and 251 in other countries. It will exit most of its international business destinations in Europe and Asia but will continue to operate in Latin America and Mexico.
The decision on which stores in the US have to be closed will depend on the outcome of their meetings with the landlords, the company stated in a letter shared with its customers on Sunday. “We do however expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the US,” the company said.
Retailers can get out of the leases and close stores at a lower cost when they file for bankruptcy.
Forever 21 Executive VP, Linda Chang said that filing for Chapter 11 bankruptcy is “an important and necessary step to secure the future of our Company as it will help reorganize our business and reposition Forever 21.”
The store has obtained $275 million in financing from JPMorgan Chase (JPM) and $75 million in new capital from TPG Sixth Street Partners. The funding is expected to allow the company to operate its business normally during the restructuring. Its Canadian subsidiary has also managed to get legal protection from creditors.
The reduction in footfalls to malls and offline stores caused by an increase in online shopping, high rent costs, and high debts have hampered retail sales in offline stores significantly. More than 8200 stores have closed in the US so far this year, far exceeding the figures of the previous year which stood at 5,589. It is being predicted that by the end of the year, the number of store closures might reach 12,000.
Forever 21 was launched in 1984 in a small Los Angeles store by South Korean immigrant couple Do Won Chang and his wife, Jin Sook. Their business thrived on the fast fashion model and quickly expanded across the US. Customers were attracted to their huge variety and inexpensive products.
It went big with its four-story, 90,000 square-foot flagship that boasts of 151 fitting rooms in the heart of New York’s Times Square. Forever 21 kept adding stores even as others began scaling down. Traditional brick-and-mortar fashion struggled have been struggling to achieve sales and profit targets in recent years, as younger buyers prefer to buy online.
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