Forever 21 is a multinational fast fashion retailer headquartered in Los Angeles, California, United States. Originally founded as the store Fashion 21 in Highland Park, Los Angeles in 1984, it is currently operated by Authentic Brands Group and Simon Property Group, with about 540 outlets.
The company sells accessories, beauty products, home goods, and clothing for women, men and children, and is considered an epitome of the fast fashion industry due to its fashionable and trendy offerings with very low pricing.The company has been involved in various controversies that include labor practice issues and copyright infringement accusations.
Learn about the Decline and Failure of Forever 21 in the Below Video
2018–2019: Competition and Bankruptcy
- Facing competition from other fast fashion brands, in 2018, it began downsizing its stores during what was dubbed a retail apocalypse. It left the Netherlands in January 2018, Thailand in June 2018, and Ireland in late 2018. Forever 21 then pulled out of Taiwan on March 31, 2019.
- In July 2019, the company was accused of fat shaming when they included weight-loss bars with orders containing plus-sized clothing. Forever 21 apologised, stating the bars were an “oversight.” The global explosion in fast fashion competitors, reputation damage (caused by both labor rights groups and environmentalists), high cost rental locations, and competition from online retail led to a temporary collapse in global operations.
- In 2019, the company experienced a 32% drop in global sales. Wrote Women’s Wear Daily about the bankruptcy, “the company over-expanded with too many stores that were too big, and lacked sufficient e-commerce business.” On September 29, 2019, Forever 21 filed for Chapter 11 bankruptcy protection.
- To downsize, the company announced that it was ceasing operations in 40 countries and closing a percentage of its 600 stores, particularly those in Asia and Europe, and to add focus to the profitable core part of its operations in the U.S. and Latin America, as well as on e-commerce and licensing agreements. Over the next year, it withdrew from Hong Kong, Portugal, Japan, and Canada, and closed its website and physical stores in England
Learn Why Did Forever 21 File for Bankruptcy ?
Forever 21 filed for bankruptcy in September 2019 primarily due to a combination of internal and external factors. Here are some key reasons to summarize behind their decision to seek bankruptcy protection:
- Rapid Expansion: Forever 21 embarked on a significant expansion spree over the years, opening numerous stores worldwide. The aggressive expansion led to over-leverage and excessive operating costs, which became unsustainable.
- Decline in Foot Traffic: The retail landscape has evolved with the rise of e-commerce, and many consumers shifted towards online shopping, resulting in reduced foot traffic to physical stores. Forever 21’s reliance on brick-and-mortar stores made it vulnerable to this shift.
- Changing Consumer Preferences: Forever 21’s “fast fashion” model, which focused on quick production of trendy, affordable clothing, faced challenges as consumers started seeking sustainable and ethically produced fashion. The brand struggled to adapt to these shifting preferences.
- Heavy Competition: The retail industry is highly competitive, with many fast-fashion and online competitors offering similar products at competitive prices. This made it harder for Forever 21 to stand out and maintain its market share.
- Rising Debt: The company had accumulated significant debt due to its expansion efforts, which became increasingly burdensome. Declining sales and profitability made it difficult for Forever 21 to service this debt.
- Inventory Management: Forever 21 also faced challenges related to inventory management. They often produced large quantities of trendy items, which led to excess inventory and clearance sales, impacting their margins.
- Legal Disputes: The company faced several legal disputes, including copyright infringement cases, which resulted in additional financial strain.
- Restructuring: Filing for bankruptcy allowed Forever 21 to restructure its operations, negotiate with creditors, and shed unprofitable leases and locations. This process was intended to provide the company with a fresh start and the opportunity to refocus its business strategy.
Forever 21’s bankruptcy filing was a strategic move to address these financial and operational challenges and work towards a more sustainable business model. It allowed them to continue operating while they restructured their operations and reduced their debt burden, giving the brand a chance to adapt to the changing retail landscape and consumer demands.