On Sunday, Forever 21 filed for bankruptcy protection for the second time in six years, blaming fast-fashion competitors Shein and Temu for its downfall. The company’s operating unit plans to shut down all U.S. operations and has begun liquidation sales at its over 350 stores. Despite this, it remains open to potential bids from buyers interested in its inventory and store locations.
Forever 21, once a leader in the fast-fashion sector, has faced tough competition in recent years, particularly from Shein and Temu, which offer low-cost, quick-to-market fashion. The company’s parent, Sparc Group, which recently reorganized as Catalyst Brands, tried to combat Shein’s dominance by partnering with the brand in 2023. However, the alliance proved ineffective in halting the company’s financial slide. Meanwhile, the U.S. law’s de minimis exemption, which allows goods valued under $800 to be shipped into the country duty-free, has allowed foreign competitors to offer products at much lower prices, putting U.S.-based companies like Forever 21 at a disadvantage.
International Operations Remain Intact
Despite the company’s U.S. liquidation, Forever 21’s international stores and website will continue operating. The brand’s intellectual property, including its name and other assets, is owned by Authentic Brands Group, which is actively seeking potential operators for the business in the U.S. The company believes the brand’s legacy and global presence offer opportunities for future growth.
Forever 21’s performance has been struggling in recent years, with the company reporting over $400 million in losses over the last three fiscal years. The financial challenges were exacerbated by supply chain issues, inflation, and changing consumer preferences. The company has projected further losses, including a $180 million EBITDA loss through 2025. Although cost-cutting measures, such as requesting rent reductions from landlords, saved some money, they were insufficient to stave off bankruptcy.
Forever 21’s bankruptcy filing highlights the challenges faced by U.S.-based fast-fashion companies as they try to compete with international players. With its significant debt—over $1.58 billion in loans and more than $100 million owed to manufacturers in China and Korea—the company’s future remains uncertain.
What The Author Thinks
While Forever 21’s bankruptcy is a sign of the changing landscape in the fashion industry, it also signals the rapid rise of global e-commerce giants like Shein and Temu. These companies have capitalized on the ability to offer trendy, affordable fashion quickly, disrupting traditional retail models. The challenge for U.S. fast-fashion brands is not just about competing with these rivals, but also about adapting to the demands of a new, digital-first consumer who values price and convenience over brand loyalty. Forever 21’s struggles may serve as a cautionary tale about the importance of innovation and adaptability in a rapidly evolving retail environment.
Featured image credit: bakkenrecord via Flickr
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