The besieged retailer Forever 21 is in talks with liquidators of future steps of the fast fashion company, according to people familiar with the question – a sign that he has trouble finding a buyer while he is thinking about a second deposit bankruptcy.
The company looked for a buyer to avoid extinction, said the people, and early January announced that it explored strategic options. However, the opening of the discussion to include liquidators gives Forever 21 the possibility of using these products to reimburse the creditors if he does not find a buyer.
It could be difficult for Forever 21 to find a buyer who could succeed in turning the brand because it is with increased competition from Chinese e-tailers Shein and Temu; higher prices; And the loss of its cool factor, said people, some of which have seen the business books. People spoke to CNBC provided anonymously due to the sensitive nature of discussions.
Forever 21 has also long fought against profitability and encountered difficulties in managing stocks and reintegrating costs, some people said.
We do not know if Forever 21 has still hired a liquidator and, even if this is the case, if he will finally move in this direction. The retailer could always find a buyer, for all or part of his assets, or conclude an agreement with the creditors to avoid liquidation.
Forever 21 refused to comment. BRG, the consulting firm with which he would have worked for restructuring assistance, did not return a request for comments.
Discussions come from months after CNBC said Forever 21 had financial difficulties and asking owners to reduce their rent up to 50% in certain places because it sought to curb costs.
He did not yet consider a second bankruptcy deposit at the time, but his position worsened in the months that followed. Its partnership with its sound that has become a rival that has become Shein has also been a mixed bag, the CEO of the authentic brand management company, the group of brands, Jamie Salter, qualifying it as a work last year during a presentation .
While Forever 21’s efforts to reduce costs and increase sales failed, the company is now considering a second bankruptcy deposit, said people, confirming what the Wall Street Journal reported previously.
Forever 21 filed for bankruptcy in 2019 and was then bought by a consortium including a group of authentic brands and a Simon real estate group and Brookfield real estate partners.
The first trip of the company through Chapter 11 allowed him to restructure his assessment and put an end to a certain number of expensive leases, but in the years that followed, he failed to repair his business and to adapt to new competitive threats.
Once one of fast fashion heavy goods vehicles, Forever 21 has been almost replaced by new titans in the category: Shein and Temu. Online companies only have an artificial technology and intelligence integrated into their operating models and are not burdened by expensive stores. They have become able to recognize and respond to consumer trends at speeds so quickly that the rest of the retail industry had trouble following.
Since Shein is part of Sparc Group, which manages Forever 21 operations, some industry observers wondered if the electronic tailer resumed its stores. The acquisition of some of the Forever 21 assets could help to legitimize Shein more in the United States and worldwide by continuing a public list in London, but a person close to the company previously declared that this was unlikely due to his inexperience in physical retail.
The difficulties of Forever 21 indicate how much the category has evolved in recent years and how difficult it is for others, in particular those who have large store fingerprints, to survive in the new landscape.
The amplified competition of Shein and Temu, and the ravages that e-tailers cause for retailers, is similar to the rise of Amazon During the past decades, which contributed to the attack on the bankruptcy deposits of retailers and liquidations.
He also fueled the rise of brand management companies like Authentic Brands, who acquire the intellectual property of brands and, in some cases, revive them years later.
However, as authentic brands already have the intellectual property of Forever 21, it is not clear which would be interested in acquiring the retailer, said Sarah Foss, lawyer for the restructuring and legal manager of Debtwire. Authentic brands and similar companies are often the first to acquire the intellectual property of companies heading towards a bankruptcy file.
“These are often the front runners that we see in some of these retail bankruptcies,” said Foss. “It would therefore be interesting to see who comes to buy forever 21, or songs.”
– Additional reports by Lillian Rizzo of CNBC