Forever 21 files for bankruptcy for second time in six years

Fast-fashion retailer Forever 21 has filed for Chapter 11 bankruptcy protection for the second time in six years as it faces diminishing mall traffic and increased competition from online platforms. The company stated it will conduct liquidation sales across its US stores while undergoing a court-supervised sale and marketing process for its assets. 

Despite the filing, Forever 21 has confirmed that its US stores, as well as its website, will remain operational, with international operations remaining unaffected. The retailer's assets are estimated to be between $100 million and $500 million, while liabilities range from $1 billion to $5 billion, with over 10,001 creditors involved.

Earlier reports stated that Forever 21 was contemplating the closure of at least 200 additional locations as part of the bankruptcy proceedings, anticipated to commence in March. 

According to a report in Bloomberg in February that cited people in the know, if a qualified buyer was not found for its remaining stores, the company was considering liquidating its entire chain of approximately 350 stores. 

The decision to potentially close these stores was influenced by years of financial losses they have incurred, leading to withheld royalties and rent payments to maintain operations. The company also planned liquidation sales at its stores while simultaneously “conducting a court‑supervised sale and marketing process for some or all of its assets."

In the event of a successful sale, Forever 21 said it may pivot away from a full wind down of operations to facilitate a going-concern transaction.