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Forever 21 Begins Winding Down Operations Amid Retail Crisis

3/18/2025
Forever 21 is winding down operations and seeking a buyer as it faces bankruptcy. With stores hosting liquidation sales and hundreds of layoffs, the brand struggles amid a retail crisis. Find out what's next for this iconic retailer!
Forever 21 Begins Winding Down Operations Amid Retail Crisis
Forever 21 is in deep trouble, winding down operations and laying off hundreds as it faces bankruptcy. What does this mean for shoppers?

Forever 21's Future: A Winding Down of Operations

Forever 21 has announced that its website and physical stores will continue to operate as the company begins to wind down its operations and seeks potential buyers for some or all of its assets. This statement was released late Sunday, indicating that while the brand faces significant challenges, it is not closing its doors just yet. In court filings, it was revealed that stores have been instructed to initiate liquidation sales for their remaining stock.

Impact on Retail Locations and Employees

Despite these changes, Forever 21's international stores remain unaffected. Currently, the retailer operates approximately 350 stores across the United States, a significant reduction from over 530 locations in 2019. Regulatory filings also disclosed plans for layoffs, with more than 350 employees expected to be affected in April as the company's Los Angeles headquarters prepares to close. Furthermore, hundreds more employees are anticipated to lose their jobs as additional stores shut down in the coming weeks.

Challenges Facing Forever 21

The retail industry has been experiencing a surge in bankruptcies, exacerbated by various economic factors including Trump’s trade policies, rising interest rates, and inflation-weary consumers. Forever 21 is among many low-cost retailers that have felt the adverse impacts of these trends. In 2024 alone, more than 7,300 retail locations have closed in the United States, reflecting a 57% increase from the previous year. Well-known retailers like Party City, Bed Bath & Beyond, and Joann's have also exited the market.

Consumer Spending and Economic Uncertainty

Consumer spending patterns are shifting, with retail sales only edging up by 0.2% in February, a figure that fell short of analyst expectations. Meanwhile, consumer sentiment plummeted by 11% in March, reaching its lowest level since November 2022. This decline is largely attributed to a “high level of uncertainty around policy and other economic factors,” according to Joanne Hsu, director of Surveys of Consumers.

The Outlook for Retail Bankruptcy

James Sowka, a corporate litigation attorney at Seyfarth Shaw, anticipates that the trend of elevated Chapter 11 filings will persist this year as companies navigate a transformed economic landscape. He emphasized that the retail sector is particularly vulnerable. “Many companies have incurred substantial debt, raised prices, and lost market share as a result,” Sowka explained. “Alternatively, some businesses felt unable to raise prices due to inflation, ultimately squeezing their margins due to elevated borrowing costs.”

Forever 21's Struggles and Future Plans

In a statement, Brad Sell, chief financial officer of F21 OpCo, noted that Forever 21 has faced difficulties in competing with foreign fast-fashion brands and managing rising costs, all while customers encounter economic hardships and shifting consumer trends. “While we have evaluated all options to best position the Company for the future, we have been unable to find a sustainable path forward,” Sell stated.

Financial Standing and Company History

According to court filings, Forever 21's estimated assets range between $100 million and $500 million, with estimated liabilities between $1 billion and $10 billion. At its peak in 2015, the company reported revenues exceeding $4 billion. Forever 21 expanded rapidly during the 2000s and 2010s, venturing into international markets and diversifying its offerings to include men’s and kids’ clothing, as well as makeup and home decor, beyond its core demographic of teens and young women.

Acquisition and Recent Developments

In 2020, Authentic Brands Group acquired Forever 21 out of bankruptcy, obtaining a share of its intellectual property and operating businesses. However, in January 2024, CEO Jamie Salter referred to the acquisition as “probably the biggest mistake I made.” Furthermore, in 2023, Forever 21 entered a partnership with the Chinese fast-fashion giant Shein, resulting in Forever 21-branded apparel being designed, manufactured, and distributed through Shein’s platform.

The Origins of Forever 21

Forever 21 began its journey in 1984 when husband-and-wife duo Do Won Chang and Jin Sook Chang opened their first store in Los Angeles under the name Fashion 21. The store was known for offering affordable, trendy clothing, primarily sourced from wholesale closeouts to keep retail costs low.

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