Forever 21 filed its bankruptcy for the second time in six years on Sunday and blamed the fast fashion and Temu fashion stations for its disappearance.
The retailer operating company should stop all operations in the United States and has already started liquidation sales to its more than 350 locations, but it is still open for offers if a buyer is ready to take inventory and continue to manage its stores, according to legal documents.
Forever 21 has been looking for a buyer for several months and has contacted more than 200 potential tenderers, 30 of whom signed confidentiality agreements, but no viable agreement has met, according to court documents. CNBC previously said that the operating company was in talks with liquidators and would find it difficult to find a buyer for his business.
The bankruptcy of the company comes six years after its emergence of its first deposit to face the Pandemic of COVID-19, the highest of inflation in decades and a new competition from arrivals in Chinese like Shein and TEMU.
In a judicial file, Stephen Coulombe, the restructuring agent of the operating company, said that Forever 21 had been “significantly and negatively” by the use by Shein and Temu of the exemption from Minmis, which “undermines” its activities. The exemption is a gap in commercial law which has historically allowed goods of less than $ 800 to be shipped to the United States without import rights. President Donald Trump is trying to end it.
“Some non -American online retailers who compete with debtors, such as Temu and Shein, took advantage of this exemption and, therefore, were able to save significant savings to consumers,” wrote Coulombe. “Consequently, retailers who have to pay rights and prices to buy products for their stores and warehouses in the United States, such as the Company, have been contaminated.”
“Despite large calls from American companies and industrial groups to make the US government create a fair playground for American retailers by closing the exemption, American laws and policies have not resolved the problem,” he added.
The operator of Forever 21, Sparc Group, who recently reorganized to form a new company called the catalyst brands, tried to counter the competitive threat of Shein in 2023 by associating with The Upstart. But the agreement did not do enough to stem the losses of the company or cause changes in the rules of minimis, said Coulombe.
“The possibility for non -American retailers to sell their products at considerably lower prices for American consumers has had a significant impact on the company’s ability to keep its traditional basic customers,” wrote Coulombe.
While the operating company of Forever 21 is heading towards outright liquidation in the United States, this does not mean that the brand will cease to exist. Its international stores and its website should continue to operate, and its brand name and other intellectual property goods belonging to the Authentic Brand Group management company are not for sale, CNBC previously reported.
The company could still find new operators who are ready to manage the company in the United States, now or in the future.
“We receive a lot of interest from solid brand operators and digital experts who share our vision and are ready to pass the brand to the next level,” said Jarrod Weber, World Lifestyle President at Authentic Brands Group, in a press release. “The decision of our American licensee to restructure its operations has no impact on the intellectual property of Forever 21 or its international activities. It presents an opportunity to accelerate the modernization of the brand’s distribution model, putting it in place to compete and direct rapidly for decades to come.”
After its first bankruptcy deposit, Forever 21 experienced a respite period when the company worked well. It had been bought by a consortium including Authentic Brands Group and the owners Simon Property Group and Brookfield Property Partners and had a new capital and a carved store fleet.
During the year 2021, he generated $ 2 billion in income and $ 165 million in Ebitda. But as competition and inflation increased, aggravated by the challenges of the supply chain and the change in consumer preferences, Forever 21’s performance began to spray. In the past three years, the company has lost more than $ 400 million, including 150 million dollars during the fiscal year 2024. The company plans to lose $ 180 million in EBITDA until 2025.
Last year, Jamie Salter Salter, CEO of the Brands Authentic group, said at a conference that the purchase of the company was “probably the biggest error I made”. A few months later, CNBC indicated that the company asked the owners to reduce its rent up to 50% that it sought to reduce costs and avoid a second bankruptcy file. Although these efforts have generated savings of $ 50 million, this was not enough to counter the losses of the company.
The operating company is currently owing $ 1.58 billion in various loans and more than $ 100 million to dozens of clothing manufacturers, mainly located in China and Korea.
Founded in 1984, Forever 21 has long been credited as a leader in rapid fashion movement. At its peak, the company employed 43,000 people and generated more than $ 4 billion in annual sales.