Current Situation

Forever 21, the well-known fashion retailer, is reportedly contemplating the closure of its brick-and-mortar locations as it faces the prospect of bankruptcy, according to a report by Bloomberg. With approximately 350 stores worldwide, the brand’s future is precarious amid unsuccessful attempts to find a buyer.

History of Financial Challenges

This would mark the second bankruptcy filing for the Los Angeles-based brand in about six years. Forever 21 previously filed for Chapter 11 in late 2019, a decision driven by excessive expansion and the swift evolution of e-commerce. At that time, the company was compelled to shut down nearly 200 of its 534 stores in the United States.

Ownership and Future Prospects

In early 2020, the Sparc Group, which includes investors like Authentic Brands Group, Simon Property Group, and Brookfield Property Partners, acquired Forever 21 for $81 million. While these entities are its major landlords, their control over the brand’s future remains uncertain as the company looks at potential options.

Sparc Group, also the owner of several other clothing labels like Lucky Brand and Brooks Brothers, recently merged with JCPenney, forming a new entity known as Catalyst Brands. Despite considerations of bankruptcy or acquisition, Authentic has indicated plans to continue licensing Forever 21 to different retailers.

Impact and Industry Trends

Founded in 1984 by South Korean immigrants Jin Sook Chang and Do Won Chang, Forever 21 once flourished with over 800 stores globally. However, the increasing challenges posed by the digital landscape and changing consumer behaviors have put remarkable pressure on the brand.

Interestingly, while Forever 21 grapples with its issues, the retail landscape, as a whole, has seen a resurgence in recent years. By May of the previous year, average monthly foot traffic was reportedly over 80 percent of pre-pandemic levels, according to a report by CBRE, with many retailers realizing sales levels above those recorded in 2019.

Investor Interest in Retail

Despite the struggles faced by individual brands, investors appear to have renewed faith in brick-and-mortar retail. For instance, Blackstone made headlines last month by acquiring the Retail Opportunity Investment Corporation for approximately $4 billion, integrating 93 properties, prominently located along the West Coast, into its portfolio.