Popular American retail clothing store Forever 21, has filed for bankruptcy.
According to CNN, the chain said it is planning to overhaul its global business, closing between 300 and 350 stores, including as many as 178 in the United States. It also plans to exit “most of its international locations in Asia and Europe.”
The company, which currently has 549 US stores and 251 in other countries, will continue to operate in Mexico and Latin America.
In a letter to customers on Sunday night (29.09.19), the company said that decisions about which US stores would close were continuing, “pending the outcome of continued conversations with landlords. We do however expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the US,” the company said.
The ability to get out of leases and close stores at a lower cost is a key advantage that the bankruptcy process affords to retailers.
Linda Chang, executive vice president for the company, said in a news release that filing for Chapter 11 bankruptcy is “an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21.”
Forever 21 said it has obtained $275 million in financing from JPMorgan Chase (JPM), as well as $75 million in new capital from TPG Sixth Street Partners that would allow it to operate “in a business as usual manner” during the restructuring. Its Canadian subsidiary has also been granted protection from creditors.
The retailer is just the latest to run into trouble amid the rise of online shopping that has cut foot traffic to malls and stores. High debt levels and rent costs have also burdened traditional retailers. In recent years, even healthy retailers have closed stores and struggling ones have filed for bankruptcy.
Forever 21 was founded in 1984 in a small Los Angeles store by South Korean immigrants Do Won Chang and his wife, Jin Sook. The chain expanded quickly in suburban malls and catering to young girls and women with a mix of inexpensive basics. The company perfected the fast-fashion model, drawing in customers with its frequently updated mix of clothes than what was offered at department stores or single brands.