Fashion store Forever 21 has filed for Chapter 11 bankruptcy protection in the US. The corporation stated it plans to “go out to maximum global locations in Asia and Europe,” but could retain operations in Mexico and Latin America. It expects to shut up to 350 stores internationally, a spokesperson stated, including as many as 178 US stores. Forever 21 sells inexpensive, cutting-edge clothes and accessories and competes with brands and Zara and H&M.. Still, a few analysts say the retailer, founded in 1984, has lost its way during the last 5 years and fallen out of favor with young US customers searching out highly cheap garb.
Like many conventional shops, the enterprise has struggled in opposition to rising opposition from online rivals. Chapter 11 safety postpones a US organization’s obligations to its creditors, giving it time to reorganize its debts or sell parts of the enterprise. A Forever 21 spokesperson stated the retailer expected to have among 450 and 500 stores globally after this method, down from its current total of about 800.
Forever 21 had announced the final week that it would pull out of Japan by the end of October due to “continued gradual sales.” The California-based firm has now stated it’s seeking to shut as many as 178 stores across the USA. It is likewise ultimate in its stores in Canada. However, it has provided little information on different markets. “Decisions as to which worldwide locations might be final are ongoing. We no longer anticipate exiting any principal markets inside the US,” the spokesperson stated.
The store sought to reassure its customers in a public letter on Sunday, saying “shops are open” and “it will preserve to experience like an everyday day.” “This no longer implies that we’re going out of commercial enterprise – on the contrary, filing for financial ruin protection is a deliberate and decisive step to place us on a success track for the future.” Neil Saunders, managing director of GlobalData Retail, stated: “The entry of Forever 21 into Chapter Eleven bankruptcy is an outcome of each changing development and tastes within the apparel marketplace and of missteps by the organization.”
He stated that, in addition to dealing with opposition from the likes of H&M, there was a loss of readability and differentiation at Forever 21. “Over the beyond few years, the logo has misplaced an awful lot of the excitement and oomph that’s vital to driving footfall and sales and is now something of an also-ran that’s too without difficulty left out. “Store standards have also been sliding, and client rankings for the quality of presentations, products, and the amount of concept in stores have dipped considerably during the last year.”
He said the financial disaster would result in a far leaner US business. However, he introduced that most, if not all, stores in Europe might be expected to close. As part of the Chapter 11 court cases, the company says it has received $275m (£224m) in financing from existing lenders and $75m in new capital. Executive vice-chairman Linda Chang defined the movements as a “critical and essential step to comfortable the future of our business enterprise so that you can enable us to reorganize our business and reposition Forever 21”.
