Forever 21’s operator plans to have all of its more than 350 locations vacated before the end of next month following its Chapter 11 bankruptcy filing over the weekend, the company said.
Legal counsel for F21 OpCo, the operator of Forever 21, said during a hearing on Tuesday that the company anticipates to vacate its approximately 354 leased stores by the end of April, a spokesperson for the fast fashion retailer told USA TODAY.
According to court records, the company plans to complete all store closing sales before May 1, with many closing before April 1. Once the closing sales are complete, the stores will close, the spokesperson noted.
“On behalf of the company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to our customers,” Brad Sell, chief financial officer of F21 OpCo, said in a news release. “We are also grateful for the many years of support from our partners and our loyal customers, who have allowed us to serve as a fashion industry leader and go-to retailer for generations.”
Although the F21 OpCo plans on closing its stores, if a potential buyer for its assets emerges, then the company may pivot away from the wind-down of store operations, the spokesperson added.
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This is the second time Forever 21’s operators has filed for bankruptcy, with the first occurring in 2019. Authentic Brands, Forever 21’s brand and intellectual property owner, and mall owners, Simon Property Group and Brookfield Corporation, saved the fast fashion retailer from that bankruptcy.
Why did Forever 21 file for bankruptcy?
Forever 21 filed for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Sunday due to “competition from foreign fast fashion companies,” rising costs, economic challenges and evolving consumer trends, Sell said.
The historic rise in inflation rates beginning in 2021 specifically led to a significant increase in F21 OpCo’s cost of operations, including the cost of inventory, distribution, transportation, and employee wages, Stephen Coulombe, co-chief restructuring officer of F21 OpCo, said in a court document supporting the bankruptcy filing.
Also hurting Forever 21 is a “highly competitive retail environment” due to the de minimis exemption, which exempts goods valued under $800 from import duties and tariffs, according to Coulombe.
“Certain non-U.S. online retailers that compete with the (F21 OpCo), such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers,” Coulombe said in the document. “Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the (F21 OpCo), have been undercut.”
President Donald Trump stopped his administration’s repeal of the exemption in February after the rapid change disrupted customs inspectors, postal and delivery services and online retailers.
What will happen to Forever 21?
At the moment, Forever 21’s physical locations and online store will continue to operate as normal, the company said. To pay employees, the operator said it filed motions with the court that will allow them to use cash collateral for wages and benefits.
Forever 21 stores being in malls across the U.S. past May will depend on whether F21 OpCo can find a buyer. Although the Forever 21 stores may be closing, Authentic Brands owns the retailer’s brand and plans to continue evolving the business.
“Forever 21 is one of the most recognizable names in fast fashion. It is a global brand rooted in the U.S. with a strong future ahead,” Jarrod Weber, global president for lifestyle at Authentic Brands, told USA TODAY in a statement on Monday. “Retail is changing, and like many brands, Forever 21 is adapting to create the right balance across stores, e-commerce and wholesale.”
Weber said that the company’s “licensee’s decision to restructure its operations does not impact Forever 21’s intellectual property or its international business.”
“It presents an opportunity to accelerate the modernization of the brand’s distribution model, setting it up to compete and lead in fast fashion for decades to come,” he said.