American fashion retailer Forever 21 has filed for bankruptcy protection in the United States, bringing it one step closer to shutting down its operations.
The company announced that its US stores and website will remain open as it begins the process of winding down.
Forever 21 was once a popular brand among young shoppers, but it has faced difficulties in recent years due to rising prices, competition from foreign fast-fashion brands, and the shift to online shopping.
“We have been unable to find a sustainable path forward, given competition from foreign fast-fashion companies… as well as rising costs, economic challenges impacting our core customers,” said Brad Sell, the company’s chief financial officer.
The brand first filed for bankruptcy in 2019 but was later bought by a group of investors. Despite this, it has continued to struggle in a changing retail market.
The company said it will conduct liquidation sales at its stores, and some or all of its assets may be sold through a court-supervised process.
“In the event of a successful sale, the Company may pivot away from a full wind-down of operations,” the firm stated.
Bankruptcy protection under Chapter 11 allows US companies to delay payments to creditors while they reorganize their debts or sell parts of the business.
Forever 21’s stores and e-commerce platforms outside the US, which are run by independent license-holders, will not be affected by the bankruptcy filing.
Forever 21 was founded in Los Angeles in 1984 by South Korean immigrants. It quickly grew in popularity due to its affordable and trendy clothing, becoming a major competitor to fast-fashion brands like Zara and H&M.
At its peak in 2016, the brand had 800 stores worldwide, with 500 in the US. However, in recent years, it has struggled to keep up with changing consumer habits and increasing competition in the fashion industry.
The future of Forever 21 now depends on whether a buyer steps forward or if the brand will be forced to shut down completely.
