Shein and Temu pressure push Forever 21 into second bankruptcy

Forever 21 is preparing to close stores as the fast-fashion retailer’s US operator considers bankruptcy — five years after the company last emerged from Chapter 11, according to multiple reports.

The Los Angeles-based company, which once had 500 locations at its peak, is working with restructuring adviser BRG to explore financial solutions and seek a potential buyer to help avoid bankruptcy, The Wall Street Journal first reported in early February, citing anonymous sources familiar with the matter. The chain was reportedly considering bankruptcy, according to CNBC and Bloomberg.

"Forever 21's operating company, which is the brand licensee in the US, continues to explore strategic options, including a potential sale, while also reducing costs and optimising its store footprint," F21 OpCo, the company's subsidiary, told USA TODAY in a statement on Wednesday night. No final judgments have been made about the process's conclusion or the potential number of closed stores; the activities are still ongoing.

Store closures underway

Local news sources in Connecticut, California, and Washington state have claimed that Forever 21 sites are closing, suggesting that closures are shutting down.

Mall owners, Simon Property Group and Brookfield Corporation partnered with international brand development firm Authentic Brands Groups in 2020 to rescue Forever 21 from bankruptcy and prevent liquidation. Forever 21 was one of the faltering clothing companies that the two mall owners and Authentic Brands collaborated to buy in recent years, along with JCPenney, Brooks Brothers, and Aeěropostale.

Last month, Catalyst Brands said it was "exploring strategic options for the operations of Forever 21."

Competition from Shein and Temu

Forever 21 has faced competition from two Chinese internet retailers, Temu and Shein.

Jamie Salter, the CEO of Authentic Brands, said at a conference a year ago that Forever 21's 2023 collaboration with Shein produced only mediocre results, according to Retail Dive.

The retail news outlet claims that Salter stated at the same conference that purchasing Forever 21 was "probably the biggest mistake I made," but he later sought the Shein relationship as a means of making things better.

"Didn't see Shein" and "didn't see Temu," Salter stated at the conference before purchasing Forever 21, according to Retail Dive.