Sorry, mall shoppers: Forever 21 goes Chapter 11
Cheap clothing chain Forever 21 said Sunday it would file for Chapter 11 bankruptcy and restructure its business, closing 178 retail stores in the United States.
The home of the $8 tank top has three stores in Portland area malls. The company said it would cease operations in 40 countries, including Canada and Japan. It will close 350 stores around the globe. Forever 21 once had more than 800 stores in 57 countries.
"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, the chain's executive vice president, told the New York Times. The Chang family owns the company, which was founded in the 1980s.
The company's footprint went from seven countries to 47 countries in less than six years, just as online shopping — in particular, mobile shopping preferred by its young demographic — was reaching critical mass. Consumers can have even cheaper apparel, such as $10 knock-off Yeezys and $3 graphic Ts from sites such as Wish.com and AliExpress.
E-commerce accounts for just 16 percent of Forever 21's sales. It has cut staffing from 43,000 in 2016 to 32,800 today.
Malls such as Portland's Lloyd Center currently have rows of vacant stores, despite a remodel and change of ownership.
The tide was also turning somewhat against fast fashion, in which new low-quality garments and accessories hit the shelves every week, becoming disposable after a few months. Consumers have reacted against the ethics of outsourcing to sweatshops from the U.S. to Asia and Latin America. Consumers also object to the environmental impact of manufacturing, which uses copious amounts of water and toxic dye.
Forever 21's revenue dropped to $3.3 billion last year, down from $4.4 billion in 2016. The restructured company expects $2.5 billion in annual sales.
The company said in a statement Sunday:
"Forever 21's restructuring will focus on maximizing the value of our U.S. footprint and shuttering certain international locations," the company said in a statement. "As such, and as part of our filing, we have requested approval to close up to 178 stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords. We do, however, expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S."
The Chang family's Riley Rose beauty stores came late to the DIY budget make-up trend and will be merged into Forever 21s.
Other high-profile retail apparel bankruptcies include Barneys New York and Diesel USA, Payless ShoeSource and Charlotte Russe The Associated Press reports that in 2019 publicly traded U.S. retailers have announced they will close 8,558 stores and open 3,446, according to the global research firm Coresight Research, compared to 5,844 closures and 3,258 openings in all of 2018.
Forever 21's carrier bags have "John 3:16," on them, known as the Gospel in a nutshell. The King James Bible verse goes "For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him shall not perish, but have everlasting life."
Reporter, The Business Tribune
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