Jamie Spencer
Fast-fashion retailer Forever 21 has filed for bankruptcy protection for the second time in six years, citing competition from Shein and Temu as key factors in its collapse.
The company’s U.S. operations are expected to cease entirely, with liquidation sales already underway at its 350+ store locations. However, court filings indicate that Forever 21 is still open to bids from potential buyers willing to take on its inventory and store operations.
Failed Attempts to Find a Buyer
Forever 21 has spent months searching for a buyer, contacting over 200 potential bidders, with 30 signing confidentiality agreements. Despite these efforts, no viable deal has materialized.
Its bankruptcy comes six years after its first filing and follows a series of economic challenges, including the COVID-19 pandemic, record-high inflation, and intensified competition from low-cost Chinese retailers.
Blaming Shein & Temu’s Competitive Edge
In a court filing, Stephen Coulombe, co-chief restructuring officer, attributed the company’s decline to Shein and Temu’s use of the de minimis exemption, a trade law loophole that allows goods under $800 to be imported into the U.S. duty-free. President Donald Trump has vowed to eliminate this exemption.
“Certain non-U.S. online retailers such as Shein and Temu have exploited this exemption, allowing them to undercut competitors like Forever 21, who must pay duties and tariffs to stock their stores,” Coulombe stated.
Attempts to Compete & Future Uncertainty
To counteract Shein’s dominance, Forever 21’s operator, Sparc Group, partnered with Shein in 2023. However, the move failed to offset losses or push regulatory action to eliminate the de minimis loophole.
Despite its U.S. liquidation, Forever 21’s brand and intellectual property remain intact and are not up for sale. Its international stores and website will continue to operate under Authentic Brands Group (ABG), which owns the brand name.
“We are receiving strong interest from brand operators and digital experts who share our vision to modernize and reposition Forever 21 in the fast fashion industry,” said Jarrod Weber, Global President of Lifestyle at ABG.
Years of Financial Struggles
Forever 21 had a brief revival after its first bankruptcy, generating $2 billion in revenue and $165 million in EBITDA in 2021. However, rising competition, inflation, and supply chain disruptions led to mounting losses:
- Over $400 million lost in the last three years
- A $150 million loss in fiscal 2024
- Projected $180 million loss in EBITDA for 2025
ABG CEO Jamie Salter admitted that acquiring Forever 21 was “probably the biggest mistake I’ve made.” The company even sought 50% rent reductions from landlords to cut costs, but savings of $50 million weren’t enough to prevent the second bankruptcy.
Massive Debts & Outstanding Liabilities
Forever 21’s operating company currently owes:
- $1.58 billion in various loans
- $100 million+ to clothing manufacturers, mainly in China and Korea
Once a Fast-Fashion Giant
Founded in 1984, Forever 21 was once a leader in the fast-fashion movement, employing 43,000 people and generating over $4 billion in annual sales at its peak.
Now, its U.S. stores face an uncertain future, while its global brand and online presence may still find new life under different operators.
