Fast fashion brand Forever 21 files for bankruptcy again

Clothing brand Forever 21's US operating company F21 OpCo has filed for bankruptcy for the second time in six years, implementing an orderly wind-down of its US business.

F21 OpCo said in a statement that itself and certain of its US subsidiaries have entered into a plan support agreement (PSA) with the company’s secured lenders and commenced voluntary chapter 11 cases, also known as "reorganisation bankruptcy", in the United States Bankruptcy Court for the District of Delaware. 

"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 foreign 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, chief financial officer of F21 OpCo in the statement. 

Stephen Coulombe, co-chief restructuring officer of Forever 21, said in a court filing that Forever 21 was “materially and negatively impacted” by non-US online retailers such as SHEIN and Temu exploiting the de minimis exemption, which "undercut" its business, according to CNBC. The exemption is a trade law loophole that has historically permitted goods valued under US$800 to enter US without import duties. He added that these platforms have taken advantage of this exemption, allowing them to pass considerable savings on to consumers.

Through the PSA and the chapter 11 proceedings, Forever 21 will conduct liquidation sales at its stores while simultaneously conducting a court‑supervised sale and marketing process for some or all of its assets. Forever 21 will also file a motion with the court seeking authority to market F21 OpCo’s assets through an auction pursuant to section 363 of the Bankruptcy Code. 

According to a filing with bankruptcy court in the District of Delaware seen by MARKETING-INTERACTIVE, Forever 21 has estimated its assets to be between US$100 million and US$500 million, while its liabilities are estimated to range from US$1 billion to US$10 billion. The filing also shows that the number of creditors falls between 10,001 and 25,000.

Through their chapter 11 cases, Forever 21 will implement an orderly wind-down of its US business while continuing to conduct a marketing process to solicit interest in a going concern transaction or a sale of some or all of its assets. In the event of a successful sale, Forever 21 may pivot away from a full wind-down of operations to facilitate a going-concern transaction. 

Meanwhile, Forever 21’s locations outside of US are operated by other licensees and are not included in the chapter 11 filings. Authentic Brands Group continues to own the intellectual property associated with the Forever 21 brand and may license the brand to other operators. The non-US Forever 21 locations and its international ecommerce sites will continue operating in the ordinary course.

“On behalf of the company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to our customers. We are also grateful for the many years of support from our partners and our loyal customers, who have allowed us to serve as a fashion industry leader and go-to retailer for generations,” Sell said.

MARKETING-INTERACTIVE has reached out to Forever 21 for a statement. 

Back in 2019, Forever 21 filed for chapter 11 and was acquired out of bankruptcy by Sparc, a joint venture formed by Authentic Brands Group, the brand's owner, along with mall operators Simon Property Group and Brookfield Asset Management.

Join us this coming 17 June for #Content360 Hong Kong, an insightful one-day event centered around responsible AI, creativity VS influencers, Xiaohongshu and more. Let's dive into the art of curating content with creativity, critical thinking and confidence!

Related articles:

Study: 12% of SHEIN customers would prefer to buy from Forever 21 amidst partnership
SHEIN to sell items from Forever 21 in new SPARC Group partnership
Barbie and Forever 21 launch 'Forever Barbie' collection on Roblox