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The company is Forever 21

External analysis: Analyze the industry of your chosen company, including Porter’s five forces as well as key driving forces of the industry.

9/30/2019
Forever 21 files for bankruptcy. It will close US stores and mostly quit Europe and Asia – CNN
LIVE TV
Forever 21 files for bankruptcy and will close
up to 178 US stores
By Nathaniel Meyersohn and Chris Isidore, CNN Business
Updated 2:34 PM ET, Mon September 30, 2019
New York (CNN Business) — Forever 21, the teenage clothing emporium that rode America’s mall boom and bust, has
filed for bankruptcy.
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, 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 lower cost is
a key advantage that the bankruptcy process a ords 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.”
A Forever 21 store in Herald Square in
Manhattan. While many retailers started
paring back stores, Forever 21 kept adding
them as recently as 2016.
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 tra c to malls and
brick-and-mortar 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.
“Retailers relying on debt to finance their growth have always been particularly susceptible to slowdowns,” said
Greg Portell, lead partner in the global consumer and retail practice of retail consulting firm A.T. Kearney.
So far this year, retailers in the United States have announced more than 8,200 store closings, already exceeding
last year’s total of 5,589, according to Coresight Research. Payless and Gymboree both filed for bankruptcy for a
second time, closing nearly 3,000 stores between them.
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9/30/2019
Forever 21 files for bankruptcy. It will close US stores and mostly quit Europe and Asia – CNN
Further retail shutdowns are expected to pile up and may
LIVE TV
reach 12,000 by the end of 2019, Coresight predicts.
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 o ered at department stores or single
brands.
Related Article: High-end retailer Barneys
files for bankruptcy
“We get new merchandise in every day. With most mall stores,
it’s usually one or two days a week,” a store manager said in
2001. “We always have the newest styles.”
The chain built massive stores, like its four-story, 90,000square-foot flagship with 151 fitting rooms in the heart of New York’s Times Square. And while many retailers
started paring back their network of stores in recent years, Forever 21 kept adding stores as recently as 2016.
Traditional brick-and-mortar retailers that specialize in selling clothes to teens and young adults have struggled in
recent years, as fashion cycles shorten and younger buyers shift from the mall to online purchases.
“The combination of fast fashion and accelerating supply chain speeds have exacerbated that risk by increasing
the chances that a retailer reads the trends wrong and misses multiple trend cycles,” said Portell.
Wet Seal, American Apparel and Delia’s filed for bankruptcy and closed all their stores during the last five years.
Aeropostale filed for bankruptcy in 2016 but has kept some stores open. Charlotte Russe also filed for bankruptcy
this year.
Many retailers have run into trouble after being purchased by private equity firms or hedge funds, which piled on
debt. Forever 21, by contrast, is still owned by its founders.
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9/30/2019
Forever 21 files for bankruptcy. It will close US stores and mostly quit Europe and Asia – CNN
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