Perhaps this fast-fashion chain was a little *too* fast.
On Sunday, Forever 21 officially filed for Chapter 11 bankruptcy protection. It was not the most surprising of the many recent retail bankruptcies: There had been lots of speculation over the past few months that it would happen, and in June, the company hired restructuring advisors.
The California-based fast-fashion retailer announced the filing in a letter to customers on its website, assuring readers that it would be keeping many of its stores open and running, business as usual, throughout the process. “We are confident this is the right path for the long-term health of our business,” it reads. “Once we complete a reorganization, Forever 21 will be a stronger, more viable company that is better positioned to prosper for years to come.”
Store closures are inevitable, though. According to the New York Times, it will close 178 in the U.S. alone, and 350 overall, and it will also cease operations in 40 countries, including Canada and Japan. (It’s said to currently operate around 800 stores.) Riley Rose, the beauty offshoot it launched 2017, is also reportedly likely to close or be folded into existing Forever 21 stores.
Forever 21 is similar to other recent retail bankruptcies — think: Payless, Wet Seal, Sears — in that many of its stores were in malls that have been losing foot traffic over the years, and in that it probably expanded its retail footprint a little too aggressively; but it also differs in a lot of ways. Launched in 1984 by South Korean immigrants Do Won and Jin Sook Chang and hitting peak success in the 2000s, it’s a fast-fashion business. By selling super-cheap, on-trend merchandise, it became part of the faction that ultimately contributed to the decline of more traditional apparel retailers.
Does Forever 21’s failure to maintain the level of demand it had in its heyday suggest that cheaply produced $5 dresses may not be a sustainable business model, or signal trouble for the fast-fashion market as a whole? That may be a bit of a stretch, as Forever 21 had some other issues, among them: opening too many stores, particularly in underperforming malls as shopping preferences shifted online; various lawsuits and call-outs over allegations ranging from copyright infringement to cultural insensitivity to labor violations to body shaming, all creating bouts of bad press; plus, Forever 21 likely lost market share to digital-first fast-fashion companies like ASOS and Fashion Nova. Meanwhile, options are increasing for more socially and environmentally conscious shoppers to shop secondhand or through rental services.
In short, this bankruptcy doesn’t yet spell death for Forever 21, or fast fashion as a whole. “What we’re hoping to do with this process is just to simplify things so we can get back to doing what we do best,” Linda Chang, executive vice president and daughter of the founders told the Times.
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Source: Fashionista.com
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