“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” said Linda Chang, the company’s executive vice president.
In its bankruptcy filing, the company said it owes $1 billion to $10 billion to more than 100,000 creditors, including Simon Property Group (owed $8.1 million), Brookfield Properties (owed $5.3 million) and FedEx (owed $3.4 million), filings show.
The retailer was founded in 1984 in Los Angeles by Do Won Chang and Jin Sook Chang. The husband and wife team saved for three years before opening their first store, originally called Fashion 21. From the beginning, they centered the business on affordable, of-the-moment clothing, much of which came from wholesale closeouts that allowed the retailer to get its merchandise directly from the manufacturers at a lower cost.
That first year, it made $700,000 in sales. At its peak, in 2015, revenue exceeded $4 billion.
“Forever 21 gives hope and inspiration to people who come here with almost nothing,” Do Won told the Los Angeles Times in 2010. “And that is a reward that humbles me: the fact that immigrants coming to America, much like I did, can come into a Forever 21 and know that all of this was started by a simple Korean immigrant with a dream.”
The company expanded rapidly from there, opening locations in dozens of countries. The stores also got bigger; the average Forever 21 store is 38,000 square feet, according to the company’s website. Over time, the family-owned company also expanded beyond its core customers — teenagers and women in their 20s — by moving into men’s and kids’ clothing, makeup, and home decor.
“There was a time when literally everything in my closet was Forever 21,” said Kasey Meredith, a 25-year-old brands reporter who started shopping at Forever 21 in middle school. “Now every time I go in the store, I have heart palpitations because it’s so overwhelming. It’s like an assault on your senses.”
Forever 21′s aggressive expansion in the past decade coincided with seismic shifts in retail, largely brought on by Amazon. The store always faced competition from such fast-fashion rivals as H&M and Zara, but the rise of e-commerce unleashed a wave of new competitors and imitators also geared toward hip and cheap. Just 16 percent of Forever 21′s sales came from e-commerce last year. (Amazon founder Jeff Bezos owns The Washington Post.)
The company has also taken heat for the environmental and labor costs of its fast, disposable products, and that has especially hurt it as young people who make up the bedrock of its customers increasingly seek out more sustainable options.
“A couple of years ago, I became very conscious of how much I was consuming. I would buy seven shirts and I would give them all away after a few wears,” Meredith said. “Now I buy something that’s higher-quality, that’s not just a little Band-Aid that causes so much environmental destruction.”
Forever 21 has received $350 million for restructuring, which it will use to sustain normal business as it tries to “right size its store base and return to the basics that allowed the company to thrive and grow,” the retailer said in a news release.
But analysts said the retailer needs to take broader action if it wants to win back consumers.
“Slimming down the operation and reducing costs is only one part of the battle,” Neil Saunders, managing director of GlobalData Retail, said in a note to clients. “The long-term survival of Forever 21 relies on the chain creating a sustainable and differentiated brand. This is something that will be very difficult to accomplish in a crowded and competitive sector.