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By Jenna deJong
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Forever 21 is preparing for a second bankruptcy filing, with plans to close at least 200 stores across the U.S. as it seeks financial restructuring and a potential buyer, according to Bloomberg.
The fast-fashion retailer, which first filed for bankruptcy in 2019, has struggled to compete with online retail giants like Shein and Temu, despite efforts to revamp its business model. Newsweek spoke to an expert about the fate of Forever 21.
Why It Matters
Forever 21 was once a dominant player in the fast-fashion industry, with over 800 stores worldwide at its peak. However, changing consumer shopping habits and increasing competition from digital retailers have continued to challenge its brick-and-mortar operations. If no buyer emerges during the restructuring process, the retailer may be forced to liquidate its entire chain of approximately 350 stores, a move that could significantly impact shopping malls and retail employees nationwide.
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Several major retailers, including JCPenney, Kohl's, and Party City, have also announced store closures, reflecting broader struggles in the retail sector. JCPenney, which emerged from bankruptcy in 2020, continues to shrink its footprint amid declining mall traffic. Kohl's is closing underperforming stores due to financial pressures, while Party City has been downsizing following its bankruptcy filing in 2023. Forever 21's potential closures fit into this larger trend, as traditional retailers face mounting challenges from online competitors and shifting consumer habits.
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What to Know
The company's U.S. operator, F21 OpCo, has been working with restructuring advisers to explore options for addressing its financial struggles, Reuters reported. In a statement to USA Today, Forever 21 confirmed that it "continues to explore strategic options, including a potential sale, while also reducing costs and optimizing its store footprint. The efforts are ongoing and no final decisions have been made regarding the outcome of the process or the number of stores that may be closed."
According to Bloomberg, some Forever 21 locations that are expected to close have been losing money for years. To keep these stores operational, the company has reportedly withheld royalties and rent payments in various locations. The Forever 21 brand and intellectual property remain under the ownership of Authentic Brands Group, which licenses them to F21 OpCo.
Forever 21 is currently operated under Catalyst Brands, which also manages JCPenney, Aéropostale, Lucky Brand, Brooks Brothers, and other retailers. Authentic Brands has indicated that regardless of the outcome of the U.S. operations, it will continue licensing the brand to other retailers and distributors.
What Forever 21 Stores Are Closing
While reports indicate that at least 200 locations will close, the specific stores affected have not yet been confirmed. Local news reports in Connecticut, California, and Washington state have mentioned closures, but an official list has yet to be released.
What People are Saying
Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "Forever 21 is the latest clothing retailer to find itself in economic no man's land, mostly due to now more affordable online stores taking over their clientele and being not as strong of a competitor in the slightly more expensive mid-range clothier tier. The result is a potentially massive restructuring that hopes to eliminate lower performing stores and refocus the company's brand, but whether it will work remains to be seen. It's not impossible, as other retailers who have filed for bankruptcy have come out on the other side more economically viable. However, it's not going to be an easy or quick process."
What's Next
Forever 21's bankruptcy proceedings could begin as early as next month, Reuters reported. If a qualified buyer is found, the retailer may be able to restructure and remain operational in some capacity. However, if no suitable investor steps forward, Forever 21 could face full liquidation, marking the end of an era for the once-iconic fashion chain.
Update 5:36 p.m. ET on 2/20/2025: This story has been updated to include comments from Alex Beene.
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