Forever 21, the California based fast fashion retailer, announced it filed for Chapter 11 bankruptcy. The retailer cited the decline in mall shoppers, expensive leases and rapid expansion as the reason behind the Company’s diminishing numbers.
The Company also announced it would stop operations in Asia and Europe, however, will continue to operate in Mexico and Latin America. Additionally, the Company will be closing up to 178 stores in the U.S.A. alone, in an attempt to restructure its business. Forever 21 secured an amount of $ 350 million in funds, of which $ 275 million was loaned by its existing lender, JP Morgan Chase.
Linda Chang, the Executive Vice President of the Company and the daughter of Forever 21 founders, said, “This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21.”
Forever 21 was founded in 1984 by a married couple, Do Won Chang and Jin Sook Chang, who immigrated from South Korea to the United States. Do Won Chang and Jin Sook Chang worked as a dishwasher and a hairdresser respectively and managed to save $ 11,000 in three years. They used this amount to open the first Forever 21 shop. The retail shop became quite popular as it offered fashionable clothing at a cheap rate and sales reached $ 700,000 in the first year alone.
As the popularity of the store rose, the founders slowly started expanding and opened a new Forever 21 store every six months. The number of Forever 21 stores saw a sharp increase in the last decade. By 2018, the Company had more than 800 stores worldwide.
However, Forever 21 saw a sharp decline in its fortunes in recent years. With consumers preferring to shop online, the stores had trouble attracting customers. This, combined with the Company’s ever expanding number of stores worldwide, resulted in Forever 21 suffering from a huge revenue loss. The loss suffered by the Company also resulted in its founders being dropped from Forbes’ billionaires list in 2019.
By filing for bankruptcy, Forever 21 joined a long list of retailers whose businesses have been affected by the changing retail industry, resulting in them declaring bankruptcy.
