Auburn Umbrella

Forever 21 or Not-so-forever Anymore?

The teen clothing apparel retailer has been preparing for a potential bankruptcy filing, according to several published reports.

The clothing brand, originally known as Fashion 21 was founded by husband and wife Do Won Chang and Jin Sook Chang from Korea in 1984 in Los Angeles. Over the years, it has established itself as one of the leading brands globally. The fast-fashion expanded quickly and generated a massive following by selling trendy clothing and accessories for low and affordable prices. According to records, as of August 2018, Forever 21 had nearly 800 stores in 57 different countries and at its peak, it made a revenue of nearly $4.4 million (INR 31,54,86,600) despite the fact that the company had also been involved in various controversies and lawsuits, varying from labour practice issues to copyright infringement accusations to religion-based issues.

However, with time, as the company concentrated on growing bigger, even as its trends became more and more conventional and imitative. Subsequently, Forever 21 started losing touch with its frequent and core customers, while competitors like H&M and Zara kept rising, until Forever 21 wasn’t the trendsetter anymore.

Apart from this, as e-commerce has continued to rise, traditional retailers like Forever 21 have struggled to adapt to changing consumer behaviours. According to a survey conducted in March 2019, millennials make 60% of their purchases online, and overall prefer online shopping rather than making efforts to go to a physical store. All these factors subsequently resulted in the fall down of the company with its sales dropping down to 20%-25% in 2018, and we witnessed the founders being removed from the Forbes list of billionaires.

The company now is $500 Million (INR 35,85,32,50,000) in debt and henceforth, filing for bankruptcy.

According to sources, Forever 21 is formulating to shut down at least 100 stores as part of a restructuring that calls for the trendy fast-fashion retailer to file for bankruptcy insurance. The plan anticipates a Chapter 11 filing, which would allow the company to keep executing its operational activities while it forges a way to pay its creditors and turn the business around.

Furthermore, if the company shuts down, this could prove to be problematic for various stores and mall owners of India, as in India, the firm is a part of Aditya Birla Fashion Ltd., and would result in some loss of the Indian Retail Economy as well.

The company has been constantly trying to arrange for additional financing and working with a team of advisors to help it restructure its deficit, but negotiations with possible lenders have been a failure so far.

So it may turn out, Forever 21 might not be forever after all.

Feature Image Credits: Indian Retailer

Avni Dhawan

avnidhawan09@gmail.com