Forever 21 filed for Chapter 11 Bankruptcy protection in Delaware on 17 March 2025. This was not the first time. The American fast-fashion retailer filed a similar legal process on 29 September 2019. These decisions underscored the fact that it has been struggling to remain relevant in the United States market amidst competition and a changing market landscape.
Filing Bankruptcy for the Second Time: Why Forever 21 is Struggling in the United States Market
First Bankruptcy Filing: Global Explosion of Fast-Fashion Competitors on Top of High Rental Costs and Reputation Damage
The first Chapter 11 bankruptcy filed in 2019 was a result of emerging issues and challenges in the external environment and internal situation of Forever 21. For example, about two years prior to the filing, the company saw its revenue drop to USD 3.40 billion, down from USD 4.38 billion in 2016 and its peak revenue of USD 4.40 billion in 2015.
Moreover, due to intensifying competition with other fast-fashion retailers, the company began shutting down its stores in 2018 across the world. This was part of the greater “retail apocalypse” trend that saw the closing of numerous brick-and-mortar stores across the United States and the changing global fashion retail market and consumer preferences.
Forever 21 specifically closed down approximately 200 stores across the U.S. and further pulled out of several geographic markets from 2018 to 2019. These included The Netherlands in January 2018, Thailand in June 2018, Ireland in late 2018, and Taiwan in March 2019. It then experienced a 32 percent decrease in global sales by the end of 2019.
The company subsequently filed for Chapter 11 bankruptcy protection on 29 September 2019. This move was accompanied by the cessation of operations in 40 countries and the closing of several more stores to focus more on the profitable aspect of its U.S. and Latin America operations, enhance its e-commerce operations, and revisit its licensing agreements.
Nevertheless, aside from the expansion of other fast-fashion retailers, Forever 21 had to address various issues. The most important ones were negative public relations due to alleged labor rights abuses, criticism of some of its promotional activities, and alleged environmental impacts of its products and operations. It also grappled with high rental costs.
Forever 21 Executive Vice President Linda Chang explained in a 2020 interview with Vogue that overexpansion brought it to bankruptcy. It aggressively expanded in 57 countries with 800 physical stores from 2010 to 2015. The new strategy for 2020 moving forward centered on strengthening its online presence and focusing on productive geographic markets.
Second Bankruptcy Filing: Decline of Brick-and-Mortar Retail and the Rise of Online-Based Shein and Temu in the Global Market
The company had to compete with the online operations of other fast-fashion retailers and even other e-commerce companies like Amazon in the European, North American, and South African markets; AliExpress, Lazada Group, and Shopee in the Southeast Asian market; and other localized e-commerce companies in specific geographic markets.
Hence, to capitalize on the shifting preference toward online retail, Forever 21 decided to relaunch its online store in 2020 through Global-E. This resulted in an online presence in 30 countries that targeted consumers in Canada, Asia Pacific, and Latin America. The company also re-entered the European market through an online store in the same year.
It is worth mentioning that the reopening of its online storefronts in various geographic markets coincided with the widescale business slowdowns across the world following the coronavirus pandemic. The enhanced e-commerce capabilities allowed it to reach its customer base despite widespread physical store closures and reduced foot traffic.
The American fast-fashion retailer further reestablish itself in key markets like Canada and China through newer partnerships. It had 540 stores by the end of 2021. The company also pushed its products on Chinese e-commerce platforms. However, despite its best efforts, Forever 21 filed for another Chapter 11 bankruptcy protection on 17 March 2025.
Bloomberg reported in February 2025 that the company would be closing 215 underperforming stores. It laid off close to 700 employees on 3 March 2025. It had a plan to avert bankruptcy by selling some 350 U.S. stores to cover its USD 1.58 billion in debt but it was unable to secure a buyer and was left with no choice but to file for bankruptcy protection.
Nevertheless, one of the driving factors behind its bankruptcy filing is its poor sales due to the rise of online-enabled fast-fashion retailers like Shein and Temu. These companies leveraged efficient supply chains, production processes, and electronic commerce to compete against more established fast-fashion companies and traditional fashion retailers.
Post-Bankruptcy Developments and Operations Outside the United States: What is Next For Forever 21?
Forever 21 is essentially shutting down all of its store operations across the United States. This means that there would be no physical stores anymore. Some observers advised that the company can still retain its U.S. presence by shifting to an online-only retail model in which it would ship products directly from factories to consumers and other retailers.
It is still worth mentioning that physical stores and online presence outside the United States will continue their regular operation. This is because these retail avenues are owned and operated by independent licensees and are not affected by U.S. bankruptcy proceedings. The entire brand is still facing global threats from retailers like Shein and Temu.
FURTHER READINGS AND REFERENCES
- Howland, D. 3 March 2025. “Forever 21 Will Lay Off Nearly 700, Close Headquarters.” Retail Dive. Available online
- Ronalds-Hannon, E. and Basu, R. 19 February 2025. “Forever 21 Plans Hundreds of Store Closures in Second Bankruptcy.” Bloomberg. Available online
- Speed, M. 6 January 2020. “Forever 21’s Linda Chang: Overexpansion Brought Company to Bankruptcy.” Vogue. Available online