Forever 21, losing young shoppers, is said to be close to bankruptcy filing
Forever 21, the fast-fashion retailer that spread its gospel of $5 shirts and $15 dresses from Southern California to hundreds of malls around the world, is preparing to file for bankruptcy in the coming weeks, according to three people with knowledge of its plans.
The privately held retailer, which has been in restructuring talks for months, may close more than 100 stores as part of the filing, one of the people said, speaking on the condition of anonymity because negotiations were still underway. The Los Angeles-based chain said last year that it had more than 800 stores globally, with most in the United States.
The company’s North Bay locations include Santa Rosa Plaza, Northgate Mall in San Rafael and Solano Shopping Center in Fairfield. Other Bay Area locations are in Emeryville, Milpitas, San Bruno, San Francisco and San Jose. All three North Bay stores came in to replace parts of former Mervyn's department stores, under a bankruptcy court deal worked out over a decade ago between Kohl's and Forever 21 to acquire dozens of locations, San Francisco Chronicle reported at the time.
The Wall Street Journal reported Wednesday that Forever 21 planned to file for bankruptcy as soon as Sunday. Alecia Pulman, an outside representative for Forever 21, said it was “inaccurate” that Forever 21 planned to file for bankruptcy Sunday but did not respond to questions regarding its plans after that.
She said in a statement that the chain was open and that “it is our intention to continue to operate the vast majority of U.S. stores, as well as a smaller amount of international stores.”
The timing of a filing could change, and it’s possible, though unlikely, that the company could be rescued at the last minute.
The details that would emerge in a bankruptcy would puncture the sphere of secrecy that the family-owned retailer has fervently maintained since its founding in the 1980s. The filing would also deal a blow to the chain’s American dream success story, which had already been tarnished over many years by a string of accusations around copyright and trademark infringement, including a recent lawsuit from singer Ariana Grande.
Forever 21, once known as Fashion 21, was created by Do Won Chang and his wife, Jin Sook, in LA shortly after they immigrated to the United States from South Korea. As the chain and its heaps of inexpensive, trendy clothing became ubiquitous at U.S. malls, it turned the couple into billionaires. Forbes recently removed them from its billionaires list, saying the Changs are now worth $800 million each.
The couple had planned to turn the business over to their daughters, Linda and Esther, who attended the University of Pennsylvania and Cornell University, respectively, and have been working at Forever 21 in senior roles. The daughters were responsible for the company’s newer Riley Rose beauty brand.
But the tide has turned against Forever 21 and retailers like it in recent years, with bankruptcies by chains including Wet Seal, Charlotte Russe and the owner of Topshop. Forever 21’s hundreds of stores have suffered from declining foot traffic, especially from shoppers in their teens and 20s. The competition is also steep: H&M and Zara continue to enjoy wide popularity, and Americans have been flocking to sites like Fashion Nova and Asos, which don’t face the rent bills for a slew of mall stores.
Consulting firm Alvarez & Marsal has been working with the company on its restructuring plans, according to two people with knowledge of the plans. When reached by telephone, Sandra Sokoloff, a representative for Alvarez & Marsal, said she could not speak to a reporter, and she did not respond to an email seeking comment.
North Bay Business Journal contributed to this report.