Forever 21 retail chain says bankruptcy and closure of stores around the world

California-based retailer Forever 21, which helped popularize fast fashion in the United States, said it is filing for bankruptcy and closing hundreds of stores around the world. The reason is the expansion of shopping centers and the changing tastes of young consumers.

Фото: Depositphotos

The private family company said it would cease operations in 40 countries, including Canada and Japan, and also close 178 stores in the United States and until 350 in general, writes SF Gate. Hundreds of stores in the United States will continue to work, and the company's website will remain active.

“We're hoping to simplify everything so we can get back to what we do best,” said Linda Chang, the network's executive vice president. Chung's parents, Do Won and Jin Suk Chung, who still run the chain, founded Forever 21 in the 1980s after immigrating to California from South Korea.

The bankruptcy is a blow to a company that prides itself on living the American dream, and a reminder of how quickly the retail landscape is changing. Forever 21 achieved great success in the early 2000s with its many products that copied modern designer styles at rock-bottom prices. Along with Zara and H&M, the brand has become a leader in bringing fast, affordable fashion to American shoppers, especially young women. But the company expanded too aggressively and technology began to destroy its business.

“We went from 7 countries to 47 countries in less than 6 years, and there were a lot of challenges with that,” Linda Chang said. At the same time, she said, "the retail industry is obviously changing - there has been a decline in trade flow and sales are increasingly moving online."

E-commerce accounted for 16% of the company's sales, last year revenue fell to 3,3 billion dollars compared to 4,4 billion dollars in 2016 year. The restructured company is expected to bring 2,5 billion dollars in annual sales. Forever 21 employs about 32 800 people, compared to 43 000 in 2016.

The executive director of the company said that the network was called Forever 21, because it is aimed at 20-year-old people, and also because "old people wanted to be 21-year old again, and young people wanted to be 21-year-old forever." Customer research has shown that 40% of Forever 21 buyers are between 25 and 40 years old. Linda Chang said the company will continue to strive to sell products below 50 dollars.

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The Forever 21 bankruptcy underscores the widening gulf between low-quality US malls that are losing customers and anchor tenants and its leading malls that continue to attract visitors.

In the years before and after the recession, Forever 21 opened stores quickly—they also served as the company's primary marketing tool—and the more the merrier. Although teenagers and women in their 20s were the primary customer base, the Forever 21 brand believed it could benefit the entire family. It has moved into locations vacated by bankrupt chains and opened huge flagships in major cities, including a space in Times Square that spans four floors (the company is in talks with the store's owner about its future).

Linda Chang said the company still sees prospects in areas such as products for men and women, but plans to reduce other areas such as home décor, electronics, and cosmetics.

According to Wendy Liebmann, executive director of the WSL Strategic Retail consulting company, young customers are increasingly turning to products and brands that value sustainability.

“Forever 21 was betting that fast fashion would be as relevant as it has been for the last decade or so, and that they just needed to be in the right places and create newness with some additional tools,” Liebmann said. “But the emotional and physical aesthetics of it are no longer what the current buyer wants.”

Mark A. Cohen, director of retail studies at Columbia Business School, said fast fashion remains as popular as ever (pointing to the success of Zara) but that Forever 21 has expanded too quickly "without a reasonable outlook."

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“This is a self-inflicted disaster,” he said. “This is a bonus for Forever 21's competition, and it is another death knell for malls that have already lost Sears, Macy, Penney and continue to struggle with the possibility of further losses.”

When she was asked if the problems with Forever 21 were related to a decrease in the flow of customers in shopping centers or a decrease in interest in fast fashion, Linda Chang said that there is “a little of both.”

Seniors Chang had long planned to transfer the company to their daughters. But Linda Chang said that she and her sister intend to continue working for the brand, but cannot say whether they will take it for themselves.

“My parents created an amazing brand,” she said. “When you think of fast fashion, there are only a few names that come to mind for most people, and to be on that top list is a pretty amazing feat.”

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