The retailer has been looking into ways to restructure its business as it deals with struggling sales. But one person familiar with the situation told CNBC that those efforts have stalled, and bankruptcy is now a more likely option.
It is unknown if the company has started to raise the loan that would fund a potential bankruptcy, and there is still a chance that the retailer could decide not to file for protection at all.
Forever 21 has more than 815 stores worldwide, with many located in malls. As sales have fallen, it could use a bankruptcy to get out of undesirable leases. In fact, retailers like Barneys and Mattress Firm have made similar moves to reduce their footprints.
If this is the case for Forever 21, it would no doubt impact mall owners, including Simon Property Group and Brookfield Property Partners. Forever 21 is Simon’s seventh-largest tenant in terms of how much rent it brings the company, with 99 stores across Simon’s portfolio. CEO David Simon told analysts in July that he would consider aiding distressed retailers in order to keep the stores open. Three years ago, Simon helped buy teen apparel retailer Aeropostale out of bankruptcy court.
One way Forever 21 has tried to boost sales is by improving its eCommerce options. Last year, the company unveiled visual search for its website and mobile eCommerce platforms. The technology, which is powered by artificial intelligence, was developed by Donde Search.
“Visual search technology bridges the gap between the convenience of online shopping and the rich discovery experience of traditional retail by enabling our customers to search for clothing in the same way they think about it — using visuals, not words,” Forever 21 President Alex Ok said in the announcement. “Early data shows that this is one of the most important innovations in the eCommerce space in recent years.”
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