Fashion retailer giant Forever 21 has officially filed for Chapter 11 bankruptcy protection in the US as it contends with a highly competitive market.
The struggling fashion empire reportedly plans to close “most of its international locations in Asia and Europe but will continue operations in Mexico and Latin America”, according to a press release.
The privately held company was reported to close more than 350 of its stores across the world and around 178 stores in the US. A spokesperson from Forever 21 also reportedly added that the popular company will have between 450 and 500 stores out of its existing 815 stores available worldwide.
It is seeking bankruptcy protection under Chapter 11, granting the California-based company protection and postponement of its obligations to its creditors and helping the firm in a global restructuring that will allow them to “focus on a profitable core part of its operations”.
“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, Executive Vice President of Forever 21, Inc.” said in a statement.
To facilitate global restructuring, Forever 21 obtained $75 million in new capital from TPG Sixth Street Partners and $275 million in financing from the company’s existing lenders with JPMorgan Chase Bank, N.A., the press release said.
“The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees,” Chang added. “With support from our key landlord and vendor constituents, we are confident we will emerge as a stronger, more competitive enterprise that is better positioned to prosper for years to come, and we remain committed to delivering the fast fashion trends that our customers have come to expect from Forever 21.”
The announcement comes amidst a changing retail landscape where traditional retailers are struggling with e-commerce rivals. Their troubles are further compounded by a declining number of mall shoppers and aggressive rapid expansion.
The fashion firm is in a growing list of retailers also seeking bankruptcy protection. More than 20 retailers in the United States were reported to have filed for bankruptcy since the beginning of 2017.
Forever 21, Inc. was founded by South Koreans Do Won and Jin Sook Chang in 1984. The teen apparel retailer is headquartered in Los Angeles, California and became the fifth-largest specialty retailer in the US. It is known to offer affordable and the latest fashion clothing and accessories.
As of April 2019, the founders were ranked at 745 on the Forbes 2019 Billionaires list, with a net worth of $3 billion. Earlier this year, husband-and-wife founders dropped down in the billionaire ranks in July 2019 amid a sales slowdown.
Earlier this month, Forever 21 was sued by pop sensation Ariana Grande for $10 million over ‘look-alike model' in their ads.