Forever 21 has filed for bankruptcy protection for the second time in six years, blaming its struggles on the rise of fast-fashion giants Shein and Temu. The retailer's operating company is set to cease all U.S. operations and has already begun liquidation sales at its more than 350 locations.
Court filings suggest a buyer could still step in to acquire Forever 21's inventory and keep stores open, offering a last-minute lifeline. However, the retailer's future remains uncertain with mounting financial struggles and market pressures.
A Struggle To Stay Afloat
Forever 21 had been seeking a buyer for months, reaching out to over 200 potential bidders, with 30 signing confidentiality agreements. Despite these efforts, no viable deal materialized. The company ultimately turned to liquidators, facing a bleak outlook for its survival in the U.S. market.
The brand's challenges come after it emerged from its first bankruptcy only to be hit by the COVID-19 pandemic, rising inflation, growing competition from online-based fast-fashion retailers, and supply chain disruptions.
The Role Of Trade Law In Forever 21's Decline
According to court filings, Forever 21 was "materially and negatively impacted" by Shein and Temu's ability to import goods into the U.S. under the de minimis exemption, which allows shipments under $800 to bypass import duties. It has given online retailers a pricing advantage over traditional retailers, who must pay tariffs and duties on their inventory.
Stephen Coulombe, the co-chief restructuring officer of Forever 21's operating company, criticized the loophole, stating that despite widespread calls from U.S. companies and industry groups to address the issue, policymakers have yet to take action. President Donald Trump has indicated plans to close the exemption, but no immediate changes have been made.
A Failed Partnership With Shein
In 2023, Forever 21's parent company, Sparc Group, partnered with Shein in an attempt to counter Shein's dominance. However, the collaboration failed to significantly improve sales or address the de minimis loophole. The company continued to lose market share as non-U.S. retailers sold at drastically lower prices, eroding Forever 21's core customer base.
The Future Of The Forever 21 Brand
Despite the U.S. liquidation, Forever 21's brand name and intellectual property—owned by Authentic Brands Group (ABG) — are not up for sale. The brand's international operations and e-commerce presence are expected to continue. ABG President Jarrod Weber emphasized that the restructuring could help modernize the brand's distribution model, positioning it for future success in the fast-fashion space.
"We are receiving lots of interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level," Weber said.
A History Of Decline
After its first bankruptcy, Forever 21 initially rebounded under the ownership of ABG and real estate firms Simon Property Group and Brookfield Property Partners. The company generated $2 billion in revenue and $165 million in EBITDA in 2021.
However, rising competition, inflation, supply chain disruptions, and shifting consumer preferences led to mounting losses. Over the last three fiscal years, Forever 21 lost more than $400 million overall, including $150 million in fiscal 2024 alone, with a projected $180 million loss through 2025.
Financial Burdens And Outstanding Debt
CEO Jamie Salter of ABG admitted in 2023 that acquiring Forever 21 was "probably the biggest mistake I've made." The company also sought to cut costs by negotiating rent reductions of up to 50%, securing $50 million in savings, but these measures were insufficient to avoid a second bankruptcy.
Forever 21 currently owes $1.58 billion in various loans and over $100 million to clothing manufacturers, primarily in China and Korea.
The Legacy Of Forever 21
Founded in 1984, Forever 21 was once a leader in the fast-fashion industry, employing 43,000 people and generating over $4 billion in annual sales at its peak. However, its struggles highlight the rapidly changing retail landscape, where online disruptors like Shein and Temu have reshaped consumer expectations and price competitiveness.
Forever 21's U.S. retail presence may be coming to an end, but the brand's future in the fashion industry remains uncertain. As it faces its second bankruptcy, the company is considering a shift toward a digital transformation and potential expansion into international markets to reinvent itself.
