Forever 21 Says They Are Bankrupt
Forever 21, the iconic teen retailer said on Sunday that would file for Chapter 11 bankruptcy, as the company grapples with low sales, online competition, and changing consumer tastes. The chain announced that they will close up to 178 of its 600 stores in United States. They also said that they will be closing stores in about 40 countries but will continue to operate online.
Forever 21 mainly depended on real estate. The company is mall chain Taubman Properties’ largest tenant, making up 4.3% of its total square footage. Its stores — averaging at around 34,000 square feet — are much larger than the stores of Taubman’s second-largest tenant, H&M, which store average 20,700 square feet.
Reasons for Bankruptcy
The Chapter 11 bankruptcy comes amid dwindling sales and struggles by the Chang family to sort out the company’s finances. They started their journey with just one store in Los Angeles in 1984 and grew into a mall staple, peaking at 700 outlets worldwide. But at presently, company faces challenges from stores like theirs all around the world like Toys ‘R’ Us, Radio Shack, JC Penney, and Sears into turmoil. Apart from these threats, many Forever 21 stores posted negative double-digit sales compared to last year. It was reported that weekly year-to-year sales had decreased around 12% to 13%.
The real estate investment trust, Vornado Realty told investors in July that it would not renew its lease with Forever 21 for its New York City Union Square store but however the vendor will keep two of its locations on Broadway and Seventh Avenue.
The bankruptcy filing doesn’t means that they are closing forever. Still they have a long road ahead to correct course in a competitive retail environment. According to the Wall Street Journal, they hired Latham & Watkins LLP this year to help renegotiate its real estate leases and Alvarez & Marsal to overhaul the company’s operations. The Journal also said that they sold their headquarters building in Los Angeles for $166 million and took out a $500 million loan too.
Edited by: The World Women News team
