Potential Bankruptcy for Forever 21
Forever 21 is a clothing retailer for teens and fashionable young adults that now faces potential bankruptcy.
The company is preparing for a potential bankruptcy, according to reports. The clothing retailer has more than 800 stores in 57 countries. Forever 21 is among the traditional “brick and mortar” stores that have seen financial trouble as young shoppers make online purchases instead of heading to the mall.
American Apparel, Aeropostale, Wet Seal, and Delia’s are among the retails the filed for bankruptcy and/or closed stores in the past five years. A major factor in declaring bankruptcy was the presence of online shopping.
Forever 21, a privately owned business still run by its founders, reports $3.4 billion in annual sales and employs 30,000 workers. The owners are trying to maintain control of the company, but this limist the ability to find funds its company may need to avoid a bankruptcy filing.
“Preparing for potential bankruptcy” could indicate that the fashion retailer has talked with lenders and advisers to restructure its debt, according to reports. Although Forever 21 was / is a strong store presence, internet consumers affect chain stores, and “potentially” Forever 21’s days may be numbered.
In the past several years, American companies that have thrived decades of substantial store business including Sears, Toys R Us, Payless, and Mattress Firm have filed for bankruptcy. Even thought these stores were household brand names, they struggled keeping up with online shopping.
A chapter 11 bankruptcy filing is an option for Forever 21. This chapter filing may offer an opportunity for Forever 21 to restructure debt while continuing to operate the business. If Forever 21 can continue profit, without rebranding or with only closing smaller, less profitable stores, they may not have to completely shut down.
Forever 21 was once praised for winning over millennials using a social media / Instagram marketing strategy. Still, shopping via a physical store experience and getting foot traffic in stores is a challenge when competing with the online market.
Perhaps the idea of providing forever fashionable and trending and relevant clothing for a younger generation of shoppers will stand the test of time. A bankruptcy, however, might be necessary to buy more time for the company.
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