Fast-fashion chain Forever 21 has filed for Chapter 11 bankruptcy protection. The company said it will close a large number of physical stores worldwide, CNBC reported on Sunday (Sept. 29).
The filing will allow the retailer to continue operating while it attempts to reorganize the business and return to profitability.
Forever 21 plans to close up to 178 stores in the U.S., as well as almost all locations in Europe and Asia. It will continue operations in Mexico and Latin America, the article said.
The 35-year-old company has 815 stores in 57 countries, over 500 of them in the US. The company is struggling with online competition and changing clothing trends, like sustainable fashion and secondhand clothing. High rents from an aggressive physical expansion also pose a problem.
The used-fashion market in the U.S. is expected to reach $64 billion by 2028, according to the retail analytics firm GlobalData, CNBC reported.
The retailer recently financed $275 million from existing lender JPMorgan Chase and $75 million from TPG Sixth Street Partners. The money will be used to keep the business running while it goes through bankruptcy procedures.
Forever 21 is among many retailers that have filed for bankruptcy to reorganize as shoppers abandon malls in favor of online shopping. Data shows that stores are closing or filing for bankruptcy this year at a faster pace than in 2018. Additional retail bankruptcy filings are expected along with the closure of brick-and-mortar stores.
A report by BDO, a professional services firm, indicates that other factors have negatively impacted the retail market, including tax reform’s after-effects, trade tariffs, January’s historic government shutdown and inclement weather that challenged some brick-and-mortar retailers in the first half of 2019.
As a result, many retailers have decided to shut down their traditional flagship stores in favor of opening smaller store models in prime urban areas, with Lord & Taylor, Abercrombie, Gap, Diesel, Calvin Klein and Ralph Lauren all going this route.