Forever 21 filed for bankruptcy protection for the second time in six years Sunday and blamed the death of fast-fashioned e-retailers Shein and Temu.
The retailer’s operating company is expected to stop all operations in the U.S. and has begun liquidation sales at more than 350 locations, but it remains open to bids if the buyer is willing to engage in inventory and continue to operate its stores.
Forever 21 has been searching for buyers for months and has contacted more than 200 potential bidders, 30 of which signed confidential agreements, but no feasible deals come together, court documents say. CNBC previously reported on operating companies In a conversation with the liquidator And it’s hard to find a buyer for its business.
The company’s bankruptcy came six years after the company’s first filing filed to face the 19th pandemic, the highest inflation in decades, and new competition from upstarts created by China, such as Shein and Temu.
In court documents, Stephen Coulombe, the joint chief restructuring officer of the operating company, said that the use of Shein and Temu’s De Minimis exemptions “is substantial and negatively impacted” by “substantially and negatively” that “weaked” its business. The exemption is a trade law loophole that historically allows goods worth less than $800 to be shipped to the United States without import duties. President Donald Trump is Try to end it.
“Some non-U.S. online retailers competing with debtors like Temu and Shein have taken advantage of this exemption and are thus able to bring substantial savings to consumers,” Coolombe wrote. “So, retailers who have to pay responsibilities and tariffs to buy products for their stores and warehouses in the United States (such as companies) have been weakened.”
“While U.S. companies and industry groups call on the U.S. government to level the playing field for U.S. retailers by closing exemptions, U.S. laws and policies have not yet resolved the issue,” he added.
SPARC Group, the operator of Forever 21, recently reorganized a new company called the Catalyst brand, trying to try Offset Shein’s competitive threat In 2023, cooperate with upstarts. But the impact of the deal is not enough to stop the company’s losses or cause any changes to the De Minimis rules, Coulombe said.
“The ability of non-U.S. retailers to sell their products to U.S. consumers at lower prices has greatly impacted the company’s ability to retain its traditional core customer base,” Coulombe wrote.
While Forever 21’s operating company is heading for a complete liquidation in the United States, that doesn’t mean the brand will no longer exist. CNBC previously reported that its international stores and websites are expected to continue operations, and that the brand name and other intellectual property owned by its brand management company Authetic Brands Group are not sold.
The company can still find new operators willing to do business in the United States or in the future.
“We are receiving interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level,” Jarrod Weber, president of Global Lifestyle at Real Brand Group, said in a statement. “Our U.S. licensee’s decision to restructure its operations will not affect Forever 21’s intellectual property or international business. It provides the opportunity to accelerate the modernization of the brand distribution model, make it compete and lead in a fast way.”
after First bankruptcy filingForever 21 enjoyed a breathing period and the business performed well. It was bought By the consortium Includes authentic brand group and Fightings Mont Real Estate Group and Brookfield Real Estate partners, and owns new capital and a fleet of pruned shops.
In fiscal year 2021, EBITDA revenue was $2 billion, $165 million. But as competition and inflation increase, supply chain challenges and changing consumer preferences intensify, Forever 21’s performance begins to emanate. The company has lost more than $400 million in the past three fiscal years, including $150 million in fiscal 2024. The company predicts that EBITDA will lose $180 million by 2025.
Last year, Jamie Salter, CEO of Authentic Brand Group Said at the meeting Purchasing a business is “probably the biggest mistake I made”. A few months later, CNBC reported that the company asked the landlords to Cut rent Up to 50% of the time to cut costs and avoid a second bankruptcy filing. Although these efforts generated $50 million in savings, they were not enough to offset the company’s losses.
The operating company currently owes $1.58 billion in various loans, with more than $100 million spent on dozens of clothing manufacturers mainly located in China and South Korea.
Founded in 1984, Forever 21 has long been regarded as the leader of the rapid movement. At its peak, the company hired 43,000 employees and generated more than $4 billion in annual sales.
