Forever 21

Forever 21 was a fast fashion pioneer known for selling trendy clothes at rock bottom prices. Really cheap, really cute. Oh my gosh, I love this. At its peak, the company had more than 800 physical stores and over $4 billion in sales. But now, the fast fashion kingpin is toppling from competition within its own industry. The company has filed for bankruptcy for the second time, forcing it to shutter stores across the US and lay off hundreds of employees. So what went wrong? The story of Forever 21 started when a couple from Korea pulled together $11,000 in savings to open the first store in Los Angeles in 1984, calling it Fashion 21. Teen apparel retail has been around for decades and AeroPostel or Abercrombie or Gap, they're definitely the stalwarts of teen apparel. I think the difference with Forever 21 is that when retailers Fast fashion wasn't a novel trend. Competitors like Zara and Topshop were already selling similar products, but Forever 21 offered cheaper prices to cons Sweatshirts, button downs, you name it, Forever 21 probably had it and for cheap. They would carry very trendy styles, styles that you would see in designer clothing stores that were priced much higher. So this allowed a very fashion conscious cons Around 12% of teen cons Forever 21'success quickly took the brand global. The retailer opened more than 200 stores internationally and at least 70 of those stores were 35,000 square feet or larger, including a 90,000 square foot store in Times Square, but expansion came at a cost. The big spaces, 35,000 square feet, that was something that they really emphasized and they really believed in, but that also meant that they had to have a lot of inventory. Over time, that became a financial drain for the company and wasn't so easy to manage. In 2019, Forever 21 filed for bankruptcy, citing its rapid international expansion and underperformance as key reasons. Cons It wasn't just international sales that pl It was also sales in U. S. malls, where the fast fashion retailer was a major tenant that dropped stems from the rise in e-commerce and the COVID-19 pandemic. They were very slow to adapt to e-commerce. By the time they filed for bankruptcy, only 16% of their sales were through e-commerce and at that point, a lot of companies had already made e-commerce a much stronger part of their offering. Forever 21 continued to hemorrhage cash to the tune of $120 million, just one month after filing for bankruptcy. That's when licensing firm Authentic Brands Group and real estate companies Simon Property Group and Brookfield Property Partners joined forces to buy Forever 21. These mall owners were concerned. If you lose your biggest stores, who's going to come into your malls? And then what does that mean about your other tenants? Part of the proposition was that with Simon and Brookfield, they're going to be more flexible about rents because they are the landlords and they might tie the rents to the revenue. We're giving the retailer a bit more wiggle room when things aren't going so well. Authentic Brands is known for scooping up many fallen legacy brands The company declined to comment on this story. But even under new ownership, Forever 21 was up against a different challenge. They were trying to get a new brand to run e-commerce powerhouses like Shi'and Temu, which utilize thousands of factories in China to p A Forever 21 graphic t-shirt sells for around $11, compared to just $5 at Shi'an. So Forever 21 formed a partnership with Shi'an in 2023. The retailers are going to have to learn what Shi'an's doing if they want to compete because they're just faster and better understanding the customer. Shi'an offered Forever 21's lineup on its website and for sure that got them some sales, but it didn't offset enough the loss from the competition from Shi'an. Forever 21 ultimately was undermined by companies The remaining Forever 21 stores across the U. S. have begun liquidation sales, offering hefty discounts on remaining products. But that doesn't mean Forever 21 will be completely gone. Authentic brands, they plan to continue to own Forever 21, then they have stores overseas that are not impacted by this bankruptcy. Actually someone So that meant you had shoppers for all the other stores in Simon Properties malls. It's possible that they don't necessarily expect these companies to be profitable for them forever.