In a shocking development, iconic fast fashion retailer Forever 21 has announced that it is shutting down all U.S. locations following its second bankruptcy filing in six years. The news comes nearly a month after the brand initiated liquidation sales, signaling the end of an era for the once-thriving retail chain.
Forever 21 Bankruptcy: What Led to the Collapse?
Forever 21, once a dominant player in the fashion industry, has been struggling financially due to increased competition from international fast fashion giants, economic downturns, and changing consumer shopping behaviors.
The Rise and Fall of Forever 21
Founded in 1984 in Los Angeles as a small 900-square-foot store called Fashion 21, Forever 21 quickly expanded in the 1990s and early 2000s, attracting young shoppers with trendy, affordable clothing. At its peak, the retailer operated over 800 stores worldwide and generated $4 billion in annual revenue.
However, after filing for bankruptcy in 2019, its store count significantly declined, reducing its global presence to 500 locations. Now, as the brand fails to secure a sustainable future, all remaining 354 U.S. stores are set to close unless a buyer is found.
Going-Out-of-Business Sales Underway
As part of its wind-down process, Forever 21 has started going-out-of-business sales across all U.S. locations. The closure is being carried out in two waves:
- Wave 1: 236 stores, classified as the poorest-performing locations, began liquidation sales in mid-February and will close by March 30.
- Wave 2: The remaining 118 locations will shut down before May 1.
Online shoppers can still purchase items from the Forever 21 website during the winding-down phase. However, gift cards will only be honored until April 15, after which they will become void.
Foreign Competition and Economic Struggles
Forever 21’s Chief Financial Officer, Brad Sell, cited increased pressure from international competitors, particularly Chinese-based online retailers Temu and Shein. These companies leverage the de minimis exemption, which allows goods valued under $800 to enter the U.S. tariff-free, leading to significantly lower prices. In contrast, Forever 21 and other traditional retailers must pay hefty import fees, impacting their ability to compete.
Additionally, the rising inflation since 2021 has affected the company’s bottom line, leading to operational difficulties and reduced consumer spending.
Future of Forever 21’s International Operations
While Forever 21 is exiting the U.S. market, its international operations and e-commerce business outside the United States remain unaffected by the bankruptcy. Stores in other countries will continue to operate as usual.
Employee Layoffs and Industry Impact
At its peak, Forever 21 employed 43,000 people, but bankruptcy proceedings in 2019 led to significant downsizing. The latest closures will result in thousands of additional job losses, further highlighting the struggles of brick-and-mortar fashion retailers in a rapidly evolving digital marketplace.
Debt and Financial Woes
According to court documents, Forever 21 is grappling with $1.6 billion in debt, while its assets are estimated to be worth between $100 million and $500 million as of March 16.
“On behalf of the company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to our customers,” said CFO Brad Sell. “We are also grateful for the many years of support from our partners and our loyal customers, who have allowed us to serve as a fashion industry leader.”
The End of an Era for Fast Fashion?
The closure of Forever 21’s U.S. stores marks the end of a major chapter in American retail history. With e-commerce giants dominating the market and consumer preferences shifting toward sustainability and online shopping, the demise of the once-iconic retailer is a stark reminder of how quickly the industry is evolving.
