Forever 21, the fast fashion clothing retailer and a staple of malls around the country, announced it has filed for bankruptcy and will close hundreds of stores, a move that underscores the struggles brick-and-mortar stores are facing among the rise in e-commerce.
The California-based company, which boasts 800 stores worldwide, plans to shutter 350 stores, including as many as 178 locations in the United States, it said Sunday. Forever 21 will also pull out of 40 countries, among them Canada and Japan. Operations in Mexico and Latin America, however, will remain.
“Essentially this allows Forever 21 to continue to operate its stores as usual, while the company takes positive steps to reorganize the business so we can return to profitability and refocus on delivering incredible styles and fashion you love for many years to come,” the company said in a letter to its customers.
Forever 21 reassured consumers the voluntary bankruptcy filing does not mean it’s going out of business but is instead a “deliberate and decisive step to put us on a successful track for the future.”
Despite the store closures, the 35-year-old company said it expects a “significant number” to stay open, and it will continue to operate its website.
“We are confident this is the right path for the long-term health of our business,” Forever 21 said. “Once we complete a reorganization, Forever 21 will be a stronger, more viable company that is better positioned to prosper for years to come.”
The company reported between $1 billion and $10 billion in liabilities and more than 100,000 creditors. Forever 21 also estimated assets between $1 billion and $10 billion.
Forever 21 joins a growing number of retailers that have filed for bankruptcy and moved to reduce their physical footprint. A recent report from BDO USA, a professional services firm, found that retailers announced a combined 7,282 store closures in the first half of the year, outpacing last year’s less than 6,000 closures.
Ten retailers filed for bankruptcy in the first three months of 2019, including shopping mall staples Payless, Gymboree, and Charlotte Russe.
BDO USA attributed the jump in store closures and bankruptcies to a flat 2018 holiday shopping season, this year’s record-setting government shutdown, the after effects of tax reform, and the ongoing trade war with China.
Tariffs imposed by the Trump administration on imports from China have led retailers to raise profits to maintain their profit margins, which in turn has affected retail sales.
[Opinion: Forever 21’s potential bankruptcy filing marks the overdue death of fast fashion]
