Forever 21 is filing for bankruptcy for the second time due to increased competition from Shein and Temu and decreasing mall traffic, which will lead to the closure of its US stores. The well-known fashion business Forever 21 has declared Chapter 11 bankruptcy for the second time as a result of declining mall traffic in the United States and fierce competition from internet merchants like Temu, Shein, and Amazon. The company, which employs over 9,200 people and operates 354 locations, has announced that it will shut down its activities in the United States while it considers selling its assets or carrying on with a partner.
Forever 21 US stores will close as the company filed for bankruptcy
Brad Sell, CFO of F21 OpCo, the company that runs Forever 21, said in a statement: We have looked at every option to better position the business for the future, but we haven’t been able to find a sustainable path because of competition from international fast fashion companies that have benefited from the de minimis exemption to sell their products at significantly lower prices. Products under $800 can enter the United States duty-free thanks to the de minimis exception, which has encouraged international marketplaces.
The company also stated that strong brand operators and digital specialists who share their vision are showing interest in their proposed redesign of the brand’s distribution approach, which will help them compete more successfully in the fast fashion sector. In addition to increased competition from companies like Shein and Temu that provide comparable products at lower rates, Forever 21’s business faced several economic difficulties. Neil Saunders, managing director of GlobalData, claims that Forever 21’s US stores are situated in malls with low traffic and are currently too big for the company’s purposes. Forever 21’s downfall is not exclusive. Falling customer spending and growing operating costs have recently resulted in major closures or bankruptcy for many other retail brands.
Other US stores that will go out of business soon
In the past few days it was announced that the large national fabric and craft supply retailer Joann is closing all of its approximately 800 US stores in 49 U.S. states and going out of business. After a DIY-driven spike in sales in the early stages of the pandemic, the more than 80-year-old chain, formerly known as Jo-Ann Fabrics, had been having financial difficulties for some years. Retail analyst Neil Saunders told NPR earlier this month that Joann has lost market share to brick-and-mortar rivals like Michaels and Hobby Lobby as well as internet US stores.
Following its second bankruptcy case in less than a year, the company announced on Sunday that it and its prepetition term lender were being sold to the GA Group. According to a statement from Joann, the successful bidders intend to start closing down the company’s operations and holding going-out-of-business sales at every store location as part of this arrangement, pending the bankruptcy court’s approval of the deal. In a frequently asked question on its website, the corporation stated that the liquidation sales would start right away and might take several weeks to finish; therefore, people should be aware of this for the coming months.
Through February 28, gift cards will still be accepted at Joann locations. However, the business will no longer accept returns, and customized discounts and discount partnerships—like those for teachers and Girl Scouts—are being put on hold. The retailer from Hudson, Ohio, declared bankruptcy a year ago to restructure its soaring debt. At the time, it stated that US stores would continue to operate. However, Joann declared bankruptcy once more in January, and Michael Prendergast, the company’s temporary CEO at the time, stated that executives thought selling the business was the best option.
