The great fast-fashion American clothing store chain, Forever 21, have just filed for bankruptcy. One of the biggest name in fashion is now going under for most places.
It appears that the company is set to close to an upward of 178 stores around the world, starting with the stores with the lowest traffic. Even so, the company has step forward to ensure customers that despite their bankruptcy announcement, a significant amount of their stores will be remain open.
Many stores are in negotiations with their respective landlords after the company filed for Chapter 11 bankruptcy. According to the company’s vice-president Linda Chang, the Chapter 11 allows the company to continue their business while reorganising their operation.
But the question on everyone mind is what happened? How can a brand with so much value and recognition go bankrupt? The simple answer to the question is that they simply don’t sell enough clothes.
The rise of online shopping that’s halving their in-stores customers and steep competition from competitors such as Zara, Uniqlo, and H&M have certainly affected Forever 21. Couple that with the high rent of their retail stores location, usually at high end malls, it’s hard not be affected. This would allow us to see how they have accumulated roughly 1 to 10 billion US dollars worth of liability.
However, they have receive an estimate US$275 million (RM1.15 billion) in financing from lenders with the help of JP Morgan Chase & Co as they become agents of the company. They’v also gathered another US$75 million (RM314 million) in new capital from TPG Sixth Street Partners.
The company once known for bringing fashionable clothes for very affordable prices will hope that their strong domestic market in Latin America and the United State can pull them through. Sadly, that won’t be the case for markets across Europe and Asia.
Source: Bloomberg , The Vocket
