Faced with dwindling operational cash and failure to appeal to a wider demographics beyond teens, Forever 21 has reportedly compelled to file bankruptcy.
The fashion retailer has reportedly been in negotiations with firms that could possibly provide financing, according to unnamed sources.
Forever 21 has also sought help for firms that could help it restructure its debt, according to people who spoke with Bloomberg on condition of anonymity.
Filing for bankruptcy is going to be the company's last-ditch effort to salvage its also dwindling profitable stores. It currently has 815 operational stores located in the United States, Canada, Europe, Japan, Korea, and the Philippines.
While the option can definitely save what was left of the business' profitable locations, the impact of its bankruptcy could trickle down to other market segments within the U.S. retail sector. Of most particularly affected is the retail rental space as Forever 21 is among the largest tenants of American malls. Possible closures and further downsizing of Forever 21 stores would add up to vacant mall spaces abandoned by other brands that had closed shop this year.
Forever 21 has been among the largest tenants of the Simon Property Group Inc. and Brookfield Property Partners LP. According to Bloomberg, Forever 21 is now considering proposals to have its tenants hold stakes in the company.
If indeed it is filing for bankruptcy, Forever 21 is the latest to join a string of retail locations that were already closed or are planning to close this year. Since 2017, there have been 102 million square feet of storage space left empty as shops closed. In 2018, 155 million square feet were added.
This year, more than 8,000 store closures are about to happen. Those who already announced closure include Sears, Kmart, party City, Walgreens, Barneys. At the same time, Payless ShoeSource could record the biggest liquidation in history as soon as it closed 2,500 stores this year. Next in line is Gymboree with 805 stores and Dress Barn with 650 stores.
Forever 21 has been quietly downsizing since July, according to a separate report from Forbes. The average size for one store used to be 38,000 square feet. It is now down to 21,000 square feet.
Observers estimate that Fashion 21 had lost about 20 to 25 percent of its previously robust sales. The company could not keep up with the competition with the likes of Zara and H&M, as well as online fashion retailers like Asos and fashion Nova.
The slump in sales had cost founders Jin Sook and Do Won Chang of their billionaire status. The couple is now worth $1.6 billion down from $3 billion. In 2015, the husband and wife were worth $5.9 billion.
