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Clothing Company Forever 21 Files for Bankruptcy

  A view inside a Forever 21 store on Union Square in Manhattan on September 12, 2019 in New York City. (Credit: Drew Angerer / Getty Images)

A view inside a Forever 21 store on Union Square in Manhattan on September 12, 2019 in New York City. (Credit: Drew Angerer / Getty Images)

Forever 21, the teenage clothing emporium that cycled in America's shopping mall boom and bust, said on Sunday that it was filing for bankruptcy in Chapter 11.

The chain said it will file a proposal to close up to 178 of the more than 800 stores, although it said in a letter to customers that "decisions on which domestic stores should be closed are pending, pending the outcome of continued talks with landlords."

"However, we expect that a significant number of these stores will remain open and operating as usual, and we do not expect to leave any major markets in the United States," the company said.

The ability to get out of leases and close stores at a lower price is an important advantage that the bankruptcy process provides retailers.

Linda Chang, executive vice president of the company, said in a news release that filing for Chapter 11 is "an important and necessary step to secure the future of our company, which will enable us to reorganize the bu siness and reposition Forever 21. "

Forever 21 is the latest retailer to collapse in the middle of the transition to online shopping that has cut foot traffic to malls and brick-and-mortar stores. High debt levels and rents have also charged traditional retailers.

Healthy Dealers Closed Stores and Fight for Bankruptcy.

"Debtors that depend on debt to finance growth have always been particularly susceptible to slowdowns," said Greg Portell, principal partner in global consumer and retail practice for retail consulting firm AT Kearney.

So far this year, dealers in the United States have announced more than 8,200 store closures, such as a ller exceeded last year's total of 5,589, according to Coresight Research. Payless and Gymboree both filed for bankruptcy for the second time, closing nearly 3,000 stores between them.

Further retail closures are expected to accumulate and could reach 12,000 by the end of 2019, predicts Coresight.

Forever 21 was founded in 1984 in a small Los Angeles store by South Korean immigrants Do Won Chang and his wife, Jin Sook. The chain expanded rapidly in suburban malls, serving young girls and women with a mix of reasonably basic. The company perfected the fast-fashion model and attracted customers with its frequently updated mix of clothing beyond that offered at department stores or individual brands.

“We get new items every day. With most malls, there are usually one or two days a week, said a store manager in 2001. "We always have the latest styles."

The chain built huge stores, such as the four-story, 90,000-square-foot flagship with 151 fitting rooms in the heart of New York's Times Square. And while many retailers started pairing their network with stores in recent years, Forever 21 continued to add stores as late as 2016.

Traditional brick-and-mortar retailers specializing in selling apparel to teens and teens adults have struggled in recent years, while the fashion cycles are shortened and younger buyers are shifting from the mall to online shopping.

"The combination of fast fashion and accelerating supply chain speeds has aggravated that risk by increasing the chances of a retailer reading the trends incorrectly and missing out on several trend cycles," said Portell.

Wet Seal, American Apparel and Delia sued for bankruptcy and closed all their stores over the past five years Aeropostale filed for bankruptcy in 2016 but has kept some stores open. Charlotte Russe also filed for bankruptcy this year.

Many traders have run into trouble after being bought by private equity companies or hedge funds, which fell into debt, however Forever 21, is still owned by its founders.

Forbes states Won and Chang have a net worth of $ 1.5 billion, and the privately held company, $ 4 billion and 30,000 employees. [19659027] 34.052234

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