Retail chain Forever 21 has filed for Chapter 11 bankruptcy protection in the United States, saying it plans to carry out a global restructuring to focus on its core operations while exiting most international locations in Asia and Europe. Its Canadian subsidiary also filed for bankruptcy, saying it would wind down its business and close 44 stores.

The company will continue operations in Mexico and Latin America. In the U.S., it may close up to 178 of its 500 stores.

“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,” Executive Vice President Linda Chang said in a statement.

The company has secured $275 million in financing from its existing lenders and $75 million in new capital from TPG Sixth Street Partners and affiliated funds. It said it plans to use the funds to continue operating the business as usual and right-size its store base. “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 …” Chang said.

“Slimming down the operation and reducing costs is only one part of the battle. The long-term survival of Forever 21 relies on the chain creating a sustainable and differentiated brand,” Gabriella Santaniello, founder of retail research firm A-Line Partners, told Reuters.

“They used to have a bit of an older customer, but customers have become more conscious of where they spend their dollars. They want sustainability, they want to feel represented; I don’t think Forever 21 particularly stood for any of this,” Santaniello said.

More than 20 U.S. retailers have filed for bankruptcy since the start of 2017. Toys ‘R’ Us filed for Chapter 11 protection in September 2017, seeking to restructure approximately $5 billion in debt, much of it coming from its 2005 private-equity buyout. Sears Holdings filed for Chapter 11 in October 2018 as it struggled to deal with more than $11 billion in liabilities.

Forever 21’s filing lists both assets and liabilities in the range of $1 billion to $10 billion.

Alvarez & Marsal is serving as its restructuring adviser.

Founded in 1984, Forever 21 is headquartered in Los Angeles. It is owned by husband-and-wife co-founders Do Won Chang and Jin Sook Chang.

Photo by Alberto Pezzali/NurPhoto via Getty Images

, , ,

Leave a Reply

Your email address will not be published. Required fields are marked *