Another American retail giant has fallen victim to changing shopping habits and foreign competition. Forever 21, once a mall staple for bargain-seeking fashion enthusiasts, has filed for Chapter 11 bankruptcy for the second time in just six years.
At a glance:
• Forever 21 has filed for Chapter 11 bankruptcy protection for the second time in six years
• The company plans to liquidate all 350 U.S. stores while seeking a buyer
• Declining mall traffic and competition from online retailers like Shein and Temu contributed to the bankruptcy
• The retailer cited foreign competition’s ability to undercut prices as a major factor
• Forever 21’s U.S. stores and website will remain operational during the bankruptcy proceedings
American Retail Giant Crumbles Under Foreign Competition
Forever 21, founded in Los Angeles in 1984 by South Korean immigrants, expanded rapidly to operate around 800 stores globally by 2016. The fast-fashion retailer was unable to find a buyer for its approximately 350 U.S. stores, leading to this second bankruptcy filing.
Chief Financial Officer Brad Sell pointed directly to foreign competition as a key factor. “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,” Sell stated.
Forever 21 is currently owned by Catalyst Brands, which was formed from a merger of Sparc Group and JC Penney. This latest bankruptcy filing estimates assets between $100 million and $500 million, with liabilities between a staggering $1 billion and $5 billion.
Mall Traffic Decline and Online Shopping Shift
The rise of e-commerce platforms has also dramatically altered the retail landscape, leaving traditional mall-based firms struggling to adapt. Forever 21’s bankruptcy is part of a broader decline in mall culture as consumers increasingly shop online.
Chinese fast-fashion retailers like Shein and Temu have gained significant market share by offering lower prices and leveraging direct-to-consumer models that bypass traditional retail overhead costs. Amazon has also captured a growing portion of the apparel market, further squeezing traditional retailers.
Liquidation and Uncertain Future
The company announced it will conduct liquidation sales at its stores while pursuing a court-supervised sale process for its assets.
While U.S. stores face an uncertain future, the company assured customers that stores and its website will remain operational during bankruptcy proceedings. International stores are unaffected by the filing, as Forever 21’s trademark and intellectual property are owned by Authentic Brands.
This second bankruptcy filing, with between 10,001 and 25,000 creditors listed, marks a dramatic fall for a retailer that was once valued at $4 billion at its peak.
