It looks like Forever 21’s reign as a shopping centre mainstay may be coming to an end. On Sunday, the company announced its plans to file for bankruptcy after facing months of financial upheaval and uncertainty.
As part of its restructuring plan, Forever 21 will end operations in 40 countries, including Canada and Japan, according to The New York Times. Additionally, it will close up to 178 stores in the United States and up to 350 in total.
“What we’re hoping to do with this process is just to simplify things so we can get back to doing what we do best,” Linda Chang, the chain’s executive vice president, told the Times. “We went from seven countries to 47 countries within a less-than-six-year time frame and with that came a lot of complexity. The retail industry is obviously changing — there has been a softening of mall traffic and sales are shifting more to online.”
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As recently as August, Forever 21 was searching for lenders to help keep operations afloat ahead of the quickly approaching Christmas shopping season. News that the retailer is officially filing for bankruptcy confirms that the search did not go well.
“The company has been in talks for additional financing and working with a team of advisers to help it restructure its debt, but negotiations with possible lenders have so far stalled,” Bloomberg explained at the time. “Focus has thus shifted toward securing a potential debtor-in-possession loan to take the company into Chapter 11, even as some window remains to strike a last-minute deal that keeps it out of court.”
While opting for bankruptcy allows Forever 21 to shutter stores that aren’t making money, the move is likely to affect some of the biggest US mall management companies, including Simon Property Group Inc. and Brookfield Property Partners LP. According to Bloomberg, Forever 21 is Simon’s sixth-largest tenant excluding department stores, with 99 outlets covering 1.5 million square feet. With Forever 21 walking away from those brick-and-mortar stores, many landlords stand to lose revenue that’s already in a precarious spot due to other major retailer bankruptcies and the rise of e-commerce.
Does this development mean the fast fashion bubble is about to pop? Considering its current global reach, probably not — or at least, not yet. As consumers’ shopping habits change — and as they become more socially conscious — retailers will be tasked with meeting them where they are. So long as there are fast fashion buyers, there will be suppliers. But what that actual transaction looks like — and where it takes place, either in a store or on your phone — largely depends on who is doing the shopping.
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