Forever 21 files for bankruptcy, to wind down operations
The operator of Forever 21 stores in the United States filed for bankruptcy protection citing fierce competition from Shein and Temu. It's the chain's second filing in six years.
F21 OpCo, the operator of the formerly high-flying retailer, said it will start a wind down of Forever 21’s U.S. business while continuing to look for a buyer some or all of its assets. Liquidation sales have already started at the chain's approximate 360 stores. (The bankruptcy filing does not affect Forever 21’s international stores.)
RCS Real Estate Advisors as been retained by Forever 21 to market and sell its U.S. lease portfolio, which includes approximately 360 store leases across major U.S. markets. Store sizes range from 4,000 to 150,000 sq. ft., with an average size of approximately 21,000 sq. ft.
Forever 21 has struggled in recent years amid increased online competition, particularly from Chinese budget retailers Shein and Temu, and the rising popularity of resale among teen shoppers. It listed assets of between $100 million and $500 million and liabilities of $1 billion to $10 billion in its filing.
The company said its U.S. stores and website will remain open and continue serving customers for now. Authentic Brands Group continues to own the intellectual property associated with the Forever 21 brand and may license the brand to other operators.
“While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends,” said Brad Sell, CFO of F21 OpCo. (The de minimis tax exemption lets shipments headed to U.S. businesses and consumers valued at less than $800 to enter the country tax free and duty free.)
In a statement to CNBC, Jarrod Weber, global president of lifestyle at Authentic Brands Group, noted that its U.S. licensee’s decision to restructure operations does not impact Forever 21′s intellectual property or its international business.
"We are receiving lots of interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level,” said Weber.
Forever 21 filed for bankruptcy in 2019 and was acquired by a consortium of parties including Authentic Brands Group and Simon Property Group and Brookfield Property Partners.
One of the pioneers of fast-fasion, the chain was founded in Los Angeles in 1984 by South Korean immigrants. By 2016, it was operating around 800 stores globally, including about 500 in the United States.
Advisors
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young Conaway Stargatt & Taylor, LLP are serving as the company’s proposed legal counsel, and BRG is serving as the company’s proposed financial advisor.
RCS Real Estate Advisors is serving as the company’s proposed real estate advisor. SSG Capital Advisors, LLC is serving as the company’s investment banker, and Reevemark is serving as communications advisor to the company.
