Forever 21, the popular fashion retailer founded in 1984, has filed for bankruptcy for the second time. Known for its trendy and affordable clothing, the brand was once a customer favorite and a market disruptor. Despite having over 540 store locations worldwide and being headquartered in Los Angeles, the company has faced mounting challenges. In recent court filings, Forever 21 cited competition from international fast fashion giants Shein and Temu as key factors in its financial struggles.
The decision to file for bankruptcy comes as Forever 21 grapples with growing operational costs and shifting consumer trends. Forever 21's Chief Financial Officer, Brad Sell, highlighted these challenges, noting that foreign competitors have leveraged de minimis exemptions to offer lower prices.
"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," stated Brad Sell.
De minimis exemptions allow imported goods valued under $800 to enter the United States duty-free, a loophole that competitors like Shein and Temu reportedly exploit to their advantage. Forever 21 claims that these exemptions have placed them at a disadvantage in terms of pricing and profitability.
"Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers. Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as [Forever 21], have been undercut," stated Forever 21.
Despite the bankruptcy filing, Forever 21 plans to keep its U.S. stores and website operational during the proceedings. The company intends to conduct liquidation sales at its U.S. locations while seeking a new buyer. The retailer was previously purchased by Authentic Brands Group, Simon Property Group, and Brookfield Property Partners in 2020 following its initial bankruptcy in 2019.
"In the event of a successful sale, the Company may pivot away from a full wind down of operations to facilitate a going-concern transaction," according to Forever 21.
