It used to be known as one of the trendiest destinations at malls across the country, but Forever 21 is now one of the many formerly popular chain stores on the chopping block. The retailer filed for bankruptcy protection for the second time on Sunday—and executives are blaming online competitors for the chain's demise.
As CNBC reported, Forever 21 is expected to close all U.S. stores—including more than 350 locations—and has already started liquidation sales, though it's still open for bids from willing buyers. Over the past several months, the retailer has reportedly been in contact with over 200 potential bidders, with 30 signing confidentiality agreements, but no deal has been made.
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"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, and evolving consumer trends," Chief Financial Officer Brad Sell said in a statement shared with NPR.
Forever 21 first filed for bankruptcy in 2019, managing to survive after that as a "zombie brand" with fewer stores, but has continued to struggle.
Stephen Coulombe, the operating company’s co-chief restructuring officer, said in a court filing that Forever 21 was “materially and negatively impacted” by online competitors Shein and Temu, which can ship inexpensive clothes and accessories straight to U.S. shoppers without import duties thanks to a tax loophole.
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“Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers,” Coulombe wrote. “Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the Company, have been undercut.”
The U.S. government is reportedly working to close the loophole in question.
After Forever 21 filed for bankruptcy the first time in 2019, the retailer was purchased by Authentic Brands Group, a firm which buys and and overhauls poorly performing brands. Authentic Brands' CEO later called the move his "biggest mistake."
A 2023 partnership with Shein also failed to boost profits. Forever 21's liabilities are currently ten times bigger than its assets, according to court documents.
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