The fate of the iconic clothing brand has been decided. It is now official that the brand is closing down all its stores in the country under a second bankruptcy over the span of 6 years. It has already started the liquidation process for more than 350 locations in the US. The brand was reportedly impacted by changes in consumer preferences as well as tough competition from e-tailers like Shein and Temu. If you want to know more about Forever 21 closing all the stores in the US, this article is for you.
Forever 21 Closing All Stores In The US: Difficulty In Finding Buyers
The iconic fashion brand was reportedly seeking a buyer for several months. It also contacted more than 200 potential bidders, 30 out of these signed confidentiality agreements. However, according to the court papers, nothing viable came together. The brand has declared a second bankruptcy in the span of 6 years. It managed to somehow emerge from the COVID-19 pandemic only to be hit by the highest inflation in decades. It also faced new challenges like cut-throat competition from e-tailers like Shein and Temu.
What Stephen Coulombe Stated In The Court Filing?
Stephen Coulombe, who is the co-chief restructuring officer of Forever 21, stated in the court filing that competitors like Shein and Temu materially as well as negatively impacted the company. He also blamed the de minimis exemption for causing an undercut in its business. De minimis exemption in the trade law allows goods worth less than $800 to be shipped into the United States without any import duties. It is a loophole that is severely affecting many retailers in the country. The newly elected President Donald Trump is trying to eliminate the exemption.
What Stephen Coulombe Said About The De Minimis Exemption?
Stephen Coulombe explained how several non-US retailers like Shein and Temu are passing significant savings to customers. The De Minimis exemption is what makes this possible giving undue advantage to these retailers. Consequently, it is the US retailers who have to pay duties as well as tariffs to buy products for their stores as well as warehouses located in America. Despite widespread calls and requests from various industrialists to create a level playing field for US retailers, he stated that the problem still exists. The Forever 21 owners partnered with Shein in 2023 trying to tackle the threat from the competitors. However, the deal was not enough to stem the losses. Coulombe mentioned the company was unable to retain its traditional core customer base because of the exemption.
Gradual Decrease In Forever 21 Stores Sales
After the company emerged successfully from its first bankruptcy, it performed rather well after the consortium including Authentic Brands Group and landlords Simon Property Group and Brookfield Property Partners bought it. It generated a total of $2 billion in revenue and a total of $165 million in EBITDA in 2021.
However, the great performance was short-lived. The changes in consumer preferences and the tough competition significantly affected its sales. Forever 21 lost more than $400 million in the last three years including $150 million in fiscal 2024. It also lost a total of $180 million in EBITDA through 2025. Jamie Salter, who is the CEO of Authentic Brands Group termed the purchase of Forever 21 as his biggest mistake.
Firm Open For Operators Willing To Run The Business
Forever 21 is currently heading towards an outright liquidation. However, the company has also made it clear that it doesn’t mean the brand has stopped existing. The firm stated that it is open to operators who are willing to run the business in the US. It is also reportedly receiving lots of interest from strong brand operators. The international stores of Forever 21 as well as its online operations are expected to continue. The intellectual property that Authentic Brands Group owns is not up for sale either.
