Forever 21 files for bankruptcy again amid rising competition from online fast fashion rivals

Forever 21, a popular fashion retailer, has filed for bankruptcy for the second time in six years and announced a wind-down of its United States operations. The company has struggled to compete in the increasingly crowded fast-fashion market, particularly in the face of rising costs, e-commerce dominance, and declining foot traffic in shopping malls. These pressures have forced the retailer to initiate liquidation sales while continuing to operate its US stores and website during the process.

According to Brad Sell, Finance Chief of F21 OpCo, the situation has been exacerbated by foreign competitors taking advantage of the de minimis exemption. This US policy waives standard customs and tariffs on individual imported items valued at less than $800, enabling overseas companies such as Shein and Temu to offer ultra-low pricing. These dynamics have eroded Forever 21’s market share and pricing power, further troubling the business.

Founded in Los Angeles in 1984 by South Korean immigrants, Forever 21 grew into a major player in affordable fashion, especially among younger consumers. By 2016, the retailer had expanded to operate 800 stores globally, with 500 in the United States. However, the rise of online fashion platforms and the wider decline of mega-malls have placed intense pressure on brick-and-mortar outlets like Forever 21, triggering financial challenges across the retail industry. In fact, the past year alone has been marked by 20 retail bankruptcy filings in the United States.

Currently, F21 OpCo is progressing through court-supervised sales and marketing of its assets, valued between $100 million and $500 million. Despite its ongoing operations, the company reported liabilities ranging between $1 billion and $10 billion. It is worth noting that Forever 21’s global stores are not affected by this process and will continue operations as normal, offering some continuity for its international presence.

Having previously filed for bankruptcy in 2019, Forever 21 was subsequently acquired by Sparc Group before becoming part of Catalyst Brands through a merger between Sparc and department store chain JC Penney. Authentic Brands, which owns the Forever 21 trademark, has confirmed that the intellectual property of the brand could persist in some fashion even as physical operations in the US wind down. Last year, Authentic Brands’ CEO referred to acquiring Forever 21 as a significant misstep, reflecting the ongoing turbulence surrounding the brand.

This story is emblematic of the broader challenges facing retail in the rapid shift to digital commerce, where cost structures and market forces are heavily shaped by globalisation and technological competition.