Forever 21, which helped popularize fast fashion, to file for bankruptcy

Forever 21, the California retailer that helped popularize fast fashion in the United States with its bustling stores and $ 5 tops, said on Sunday night that bankruptcy would be sought, a sign of malls eroding and the changing taste . by young consumers.

The private, family-run company curtailed months of speculation around the restructuring by saying it would stop operations in 40 countries, including Canada and Japan, as part of filing Chapter 11. It will close up to 178 stores in the United States and up to 350 everywhere.

Forever 21 said it will continue to operate its site and hundreds of stores in the United States, where it is an important tenant for mall owners, as well as stores in Mexico and Latin America.

"What we hope to do with this process is simply to simplify things so that we can get back to doing what we do best," Linda Chang, the chain's executive vice president, said in an interview. Ms Chang's parents, Do Won and Jin Sook Chang, who still run the chain, founded Forever 21 in the 1980s after immigrating to California from South Korea.

The bankruptcy is a blow to a company that relied on embodying the American dream, as well as a reminder of how quickly the retail landscape is transforming. Forever 21 saw great success in the early 2000s with its range of items that mimic instant designer styles at rock-bottom prices. It joined Zara and H&M in making fast, disposable fashion widely available to American shoppers, especially young women, who were exposed to new items apparently every time they entered a store. But the company expanded too aggressively just as technology began to grow.

"We went from seven countries to 47 countries in less than six years and with that came a lot of complexity," said Ms. Sa Chang. At the same time, she said, "Retail is clearly changing – shopping malls have been softened and sales are moving more online."

Forever 21, which said e-commerce accounted for 16 percent of its sales, saw revenues fall to $ 3.3 billion last year, down from $ 4.4 billion in 2016. It is expected that the restructured company will bring $ 2.5 billion in annual sales. The company employs around 32,800 employees, down from 43,000 in 2016.

Mr. Chang, the company's CEO, said in a 2012 interview that the chain was named Forever 21 because it targeted 20-somethings and because "old people would be 21 again, and young people would be 21 forever." A A large portion of the company's base is minorities, Chang said, and customer studies have suggested that 40 percent of Forever 21 buyers are between the ages of 25 and 40. She said the company still aims to keep goods under $ 50. [19659005] Forever 21's bankruptcy puts the spotlight on the expanded demarcation between lower-quality US shopping centers, that lose customers and appease tenants, and the best malls that continues to draw foot traffic.

In the years before and after the recession, Forever opened 21 stores with a fast clip – they also served as the company's most important marketing vehicle – and larger ones were often better. While teens and 20-something women were the core customer base, Forever 21 thought it could sell to the whole family. It moved into areas abandoned by bankruptcy chains such as Mervyn and Gottschalks and opened large flagships in major cities, including a Times Square colossus in 2010 that was around 90,000 square feet and still spans four floors. (The company said it is in discussions with the landlord of that store about the future.)

The retailer, who did not pay rent on its stores in September to preserve capital, believes it can renegotiate many of its leases on its US stores after filing, said Jon Goulding, a manager at the consulting firm Alvarez & Marsal who will be Forever 21's chief restructuring manager during the case. He said that closures could begin Oct. 31 for the stores that close, and that he expected the final number to be below 178.

"A number of these people will not have boxes the size we have with what's going on shopping area, "he said of the chain's landlords. While the company did not have specific data available, Goulding said underperforming stores were likely located in lower-quality malls and those that had lost other bankruptcy dealers, such as Sears.

Forever 21 continued to add more lasting as it grew and did not seem to predict the rise of digitally savvy competitors such as Asos and Fashion Nova, it introduced F21 Red in 2014 with a plan to sell Forever 21 basics like $ 1.90 camisoles and $ 7.90 jeans, while Riley Rose, a beauty brand created by Linda Chang and her sister, Esther, opened in 2017. The Riley Rose stores are likely to close and become part of existing F will take over 21 locations, while F21 Red will continue to operate some standalone locations.

Ms. Chang said the company still promises in areas such as men's and girls' goods, but that it planned to share other areas such as home decor, electronics and cosmetics.

The battle for Forever 21 has provoked questions around the appeal of fast fashion more broadly. The industry has faced setbacks around the environmental impact of quickly disposable clothing and workers' safety concerns in the wake of the 2013 Rana Plaza building collapse in Bangladesh that killed more than 1,100 garment workers.

Younger buyers have increasingly turned to shipped goods and brands that claim sustainability as a value, said Wendy Liebmann, CEO of consulting firm WSL Strategic Retail.

Forever 21 “put their bets on this notion that fast fashion should continue in the same way it had for the last decade or so, and that they just needed to be in the right places and create news with some of the spinoffs they played with, "Liebmann said. "The emotional and physical aesthetics of it are not something the current shopper wants as much."

Mark A. Cohen, director of retail studies at Columbia Business School, said he thought fast fashion was just as popular as ever, pointing to Zara's success, but Forever 21 had expanded too quickly "regardless of a reasonable view . "

" It's a self-inflicted disaster, "he said. "This is a bonanza for the competition that Forever 21 has, and it's another death knell for the malls they are in, which has already lost a Sears, Macy's, Penney's, and is struggling to reduce footprints each day."

Asked Whether Forever 21's challenges were from declining mall traffic or declining interest in fast fashion, Chang said she thought it was "a bit of both."

"You hear a lot of conversations about the rental market or the resale market and stuff like that, so I think there are definitely shifts happening," she said. "It's still a huge market, but we want to make sure we get ahead of things and that we don't just keep quiet as consumers change. "

While trying to quickly imitate design products for customers, Forever 21 has been the subject of several copyright and trademark lawsuits over the years, including a recent complaint of 19459009 from singer Ariana Grande that the company used a "similar model" to make it appear as if she supported her goods, and said it could not comment on how ongoing litigation can be handled during the reorganization.

The information to be postponed in a bankruptcy will be of interest to the retailer. Forever 21 has maintained a closely-knit corporate culture even as it spread across malls in the United States and expanded to other countries. Mr. Chang and his wife rarely give interviews, although they nod to their beliefs by having "John 3:16," a reference to the Bible verse, written on every one of Forever 21's bright yellow shopping bags. The elder Changs has long planned to pass the company on to his two daughters.

Ms. Chang said she and her sister had intended to continue working for the brand, but could not speak to whether they would still take it over a day.

"My parents built an amazing brand," she said. "When you think of fast fashion, it's really just a handful of names that come to mind the most, and being on that leaderboard is a pretty amazing feat."

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