Forever 21 Founders No Longer Billionaires as Company May File for Bankruptcy
Forever 21 stores that seemingly go on forever could soon be nothing but empty spaces, a bleak reminder that even great enterprises do not last forever.
The fast-fashion retail giant, which runs a total of 815 outlets in the U.S., Canada, Europe, Japan, South Korea and the Philippines, has been preparing for a potential bankruptcy filing, Bloomberg reported last week.
According to sources familiar with the matter, Forever 21 has worked to secure additional financing, but negotiations with possible lenders have so far stalled.
As options fade, the company shifted its attention to finding a potential debtor-in-possession loan that would take it into Chapter 11 — or “reorganization” bankruptcy — which theoretically gives it a fresh start.
Headquartered in Los Angeles, Forever 21 is one of the largest American mall tenants still operating amid the so-called “retail apocalypse,” which has seen the closure of over 8,000 retail stores so far this year.
For one, discount shoe company Payless filed for bankruptcy and announced plans to close all of its 2,500 stores in February, marking what could be one of the largest retail liquidations in history, according to Forbes.
In essence, a bankruptcy filing could help Forever 21 let go of underperforming locations and recapitalize its business.
However, landlords could have problems filling vacancies as the company covers so much space — 1.5 million square feet, for instance, for 99 outlets leased with Indianapolis-based Simon Property Group.
Founded by South Korean immigrant couple Do Won Chang and Jin Sook in 1984, Forever 21 cemented its position as a leading retailer in the fast fashion scene through the years — until events leading to its own apocalypse happened.
By July, the founders fell out of the billionaires’ league, seeing their combined net worth plunge from $5.9 billion in 2015 to $1.6 billion or $800 million each, Forbes noted in another article.
Analysts suppose a number of reasons for the company’s downfall. For one, its target customer demographic of teens and young adults have simply changed shopping behaviors, spending less time in stores.
The company’s expansion into male and older consumer products has also led to a confusing brand offering, which likely disappointed its core customer base. With exceedingly massive stores, it can be difficult to search for the perfect item/s.
Increasing competition has naturally contributed to dwindling sales, particularly in the online arena, since the company has only recently reportedly started developing its website. Rivals such as H&M, Zara and Uniqlo appear to have more user-friendly sites, while the surge of smaller brands working with influencers makes it harder to win customers.
Finally, the founders have been focused on maintaining overall control of the company, which only limited its fundraising options. In another article, Bloomberg reported that a faction of officials had asked landlords to think about taking a stake in the company — without Chang’s approval and amid disagreement within the leadership.