Teenage clothing retailer Forever 21 reportedly gears up to file for bankruptcy

Forever 21, a private company, has more than 800 stores in 57 countries. And while many retailers have reduced their store network in recent years, Forever 21 added stores as recently as 2016. It still has as many stores as it indicated at the time.

One of the benefits that the bankruptcy process offers to retailers is the ability to exit leases and close stores at a lower cost.

The company did not respond to requests for comment.

Traditional brick-and-mortar retailers that specialize in selling clothing to teens and young adults have had particularly tough times in recent years as young shoppers shift from malls to shopping online.

Among the segment retailers that have filed for bankruptcy and closed all of their stores in the past five years are Wet seal, American clothing and Delia. Aéropostale also filed for bankruptcy in 2016, but kept some of its stores open.

Many retailers have encountered problems due to their buyout by private equity firms or hedge funds. But Forever 21 still belongs to its founders, Do Won and Jin Sook Chang. A husband-and-wife team, the Changs immigrated from South Korea in 1981 and launched the chain three years later with a single 900-square-foot store in Los Angeles and just $ 11,000 in savings.

Forbes lists the couple as having a net value of $ 1.5 billion, and the private company itself has annual sales of $ 3.4 billion and 30,000 employees.

Bloomberg reported in June that some of Forever 21’s management had asked some of its owners to take a stake in the company in order to find the funds it needed.

Owner of the shopping center Simon Real Estate Group (SPG), of which Forever 21 is a major tenant, took a stake in Aeropostale during its bankruptcy proceedings. In July, Simon Property CEO David Simon told investors he was open to working with other troubled tenants, without naming names.

“We will work together on other distress situations, and let’s face it, there are some out there,” Simon said. “But we’re only going to buy from companies that we think have brands and are worth the volume.”

Corn Bloomberg reported Thursday that Do Won Chang had tried to keep control of the company in any restructuring, and that his desire to do so had limited the company’s ability to raise the funds it needed.


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Anne G. Cash