Forever 21 is back on the auction block.
Once a formidable fast-fashion mall staple, Forever 21's parent company filed for bankruptcy protection late Sunday. It plans to "wind down" its U.S. operations unless it can find a buyer for the whole business or some of its parts.
The retailer has been a shell of its former self since it first filed for bankruptcy in 2019. It survived then as a zombie brand with fewer stores, but the chain has struggled to find life beyond the mall and to compete against fast-growing online rivals, including Shein and Temu that ship ultra-cheap goods from China.
"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.
Sell specifically called out a tax loophole used by Shein and Temu to ship clothes and accessories straight to U.S. shoppers. That enables them to avoid paying the import duties that Forever 21 and other retailers must pay when they ship goods in bulk to warehouses first. The U.S. government is now working to close the loophole.
Forever 21 — founded by Korean immigrants and long run as a family business — made it big in the early 2000s by making designer fashion accessible. It brought runway styles to mall shoppers at rock-bottom prices. Its store footprint grew fast and far, just as internet rivals began to eat its lunch.
After its 2019 bankruptcy, the chain was purchased by an unusual joint venture: Big mall operators Simon Property Group and Brookfield Property Partners teamed up with a firm called Authentic Brands Group, which buys and resuscitates dying brands such as Brooks Brothers or Nine West.
Authentic Brands' CEO later described his foray into once-fast-now-ultrafast fashion with Forever 21 as his "biggest mistake."
In 2023, Forever 21's new owners tried another maneuver, signing a partnership with Shein. But losses continued, worsened by the high inflation that had shoppers tightening their clothing budgets. Court documents show Forever 21's liabilities are now ten times bigger than its assets.
The company says its stores and website will keep running while executives figure out the chain's future. Stores outside the U.S. are not part of the Chapter 11 filings.
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