Forever 21 is on the edge of bankruptcy—again. This time, it could mean shutting down all its stores.
Sarah Foss, head of legal at Debtwire, expects the retailer to file for Chapter 11 within weeks. She says a full liquidation is likely. That means all 350 locations could close.
"A Chapter 11 liquidation appears to be the most likely scenario," Foss explained. She noted that no buyer has stepped up to take over the U.S. stores. This would hit employees hard and impact malls already struggling with online shopping trends.
Bloomberg sources say the company is already planning to close at least 200 stores as part of the process.
The brand has been in trouble for years. It first filed for bankruptcy in 2019, closing over 100 stores. The remaining locations were sold to a group of buyers.
Forever 21's owners, Authentic Brands Group and Simon Property Group, formed Sparc Group to keep it going. In January, Sparc teamed up with JCPenney to create Catalyst Brands.
Retail bankruptcies are on the rise. Debtwire reports 20 Chapter 11 filings in 2024 alone. Even more troubling, some businesses—like Forever 21—have needed a second bankruptcy, called a "Chapter 22." Since 2016, at least 25 companies have taken that route.
Foss blames the retailer’s downfall on tough competition. Fast-fashion giants like Shein and Temu offer trendy, cheap clothes, putting massive pressure on traditional stores. Forever 21's large, costly locations haven’t helped either.
Coresight Research predicts retail closures could hit 15,000 by 2025. Shein and Temu’s aggressive pricing strategies are driving much of that. While both brands are booming, they’ve faced criticism for labor practices and intellectual property issues.
Still, Forever 21’s name might not vanish. Foss says Authentic Brands Group still owns its intellectual property. "The brand could still have significant value, even if stores shut down," she explained.