For the second time in six years, clothing retailer Forever 21 has filed for bankruptcy in the United States and while it will likely liquidate stores there, its stores in Canada and elsewhere will remain unaffected. The company cited greater competition online, particularly from Chinese suppliers taking advantage of duty-free treatment of low-cost packages, high costs, and slower mall activity as having contributed to this decision.
“We’ve been unable to find a sustainable path forward, given competition from foreign fast-fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin,” said Brad Sell, finance chief at F21 OpCo, which is responsible for operating the retailer’s nearly 350 U.S. stores.
Liquidation sales will take place as the company goes through a court-supervised sale and marketing process for its assets that are estimated to be valued between $100 and $500 million USD. Its liabilities range between $1 billion and $10 billion USD.
During the last round of bankruptcy proceedings in 2019, Sparc Group, a joint venture between Authentic Brands Group, Simon Property, and Brookfield Asset Management, was able to pull the retailer out of bankruptcy protection. If sold, the company may pivot away from a full wind-down of operations, instead focused on a going-concern transaction. Authentic Brands will continue to own Forever 21’s trademark and intellectual property.
