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Forever 21 Files for Bankruptcy
Los Angeles–headquartered Forever 21 was one of the architects of fast fashion, but, after three decades of growth, the family-run business, which enjoyed more than $3.4 billion in revenues in 2017, filed for Chapter 11 bankruptcy. In the filings, the company revealed that it owes between $1 billion and $10 billion to more than 100,000 creditors including the Simon Property Group, Brookfield Properties, FedEx and Los Angeles–based A&E Clothing Inc.
It obtained $275 million in financing from existing lenders such as JPMorgan Chase Bank, N.A., as well as $75 million in new capital from TPG Sixth Street Partners, according to a September 29 statement. Linda Chang, Forever 21’s executive vice president and daughter of founders Do Won Chang and Jin Sook Chang, said that the $350 million in financing was a lifeline.
“This was an important and necessary step to secure the future of our company, and it will enable us to reorganize our business and reposition Forever 21,” she said.
Blame for the giant retailer’s bankruptcy has been leveled at the once-innovative company for not getting more heavily involved with digital commerce.
“Forever 21 is overexposed in bricks-and-mortar,” said Syama Meagher, chief executive officer of the Los Angeles–headquartered Scaling Retail consultancy.
The fashionable company also has been criticized for not changing with consumer tastes. Forever 21’s modus operandi of wearing a garment a few times and disposing of it has been increasingly critiqued by sustainability advocates.
Media reports also found fault with the Chang family’s management style. The family let few outsiders into the decision-making process for the multibillion-dollar operation. Without equity analysts and a board of directors giving crucial management advice, the company made mistakes. As part of its bankruptcy, Forever 21 is scheduled to close 87 of its stores, but it continues to develop new projects. Last month, it released a collection with Latin pop group CNCO. In September, it opened an emporium at the Hollywood & Highland retail center in Los Angeles.
