LOS ANGELES: Fast-fashion retailer Forever 21 filed for Chapter 11 bankruptcy protection Sunday, marking its second bankruptcy filing in six years as the company struggles with declining mall traffic and fierce competition from online retailers.
The U.S. operating company, which operates approximately 350 stores nationwide, said it was unable to find a buyer and will likely liquidate its assets. However, its trademark and intellectual property, owned by Authentic Brands Group, may continue in a different form.
Forever 21 plans to hold liquidation sales at its stores while pursuing a court-supervised sale process for some or all of its assets. The company said its U.S. stores and website will remain open during the process, and its international operations are unaffected.
In a filing with the U.S. Bankruptcy Court in the District of Delaware, Forever 21 estimated its assets at $100 million to $500 million, with liabilities ranging from $1 billion to $10 billion. The company listed between 10,001 and 25,000 creditors.
The retailer, founded in Los Angeles in 1984 by South Korean immigrants, once thrived as a destination for trendy, affordable clothing. At its peak in 2016, it operated about 800 stores globally, including 500 in the U.S. However, the rise of e-commerce and the decline of traditional shopping malls have posed significant challenges.
This is the second time Forever 21 has filed for bankruptcy. In 2019, it was acquired out of bankruptcy by Sparc Group, a joint venture between Authentic Brands Group and mall operators Simon Property Group and Brookfield Asset Management.
Forever 21 is now owned by Catalyst Brands, an entity formed in January through the merger of Sparc Group and JC Penney, a department store chain owned by Simon Property Group since 2020. Catalyst Brands had previously stated it was “exploring strategic options” for Forever 21.
Authentic Brands Group, which retains ownership of Forever 21’s trademark and intellectual property, could repurpose the brand in some form. Authentic Brands CEO Jamie Salter last year called the acquisition of Forever 21 “the biggest mistake I made.”
The company said a successful sale could allow it to pivot away from a full liquidation and instead facilitate a going-concern transaction.
Forever 21’s bankruptcy underscores the ongoing struggles of traditional retailers in an increasingly digital marketplace, as consumers shift their shopping habits online and away from brick-and-mortar stores.