Forever 21, the beleaguered fast-fashion retailer, is reportedly in discussions with liquidators as it faces challenges in securing a buyer, signaling potential difficulties ahead. According to sources familiar with the matter, the company is considering its options as it weighs the possibility of a second bankruptcy filing.
In early January, Forever 21 announced it was exploring strategic alternatives, including the potential sale of the company. However, the inclusion of liquidators in these discussions suggests the company may resort to selling assets to repay creditors if no buyer emerges. Sources indicate that finding a buyer capable of reviving Forever 21 could prove difficult due to intense competition from Chinese e-commerce giants Shein and Temu, rising tariffs, and the brand’s diminished appeal.
Forever 21 has long grappled with profitability issues, compounded by challenges in inventory management and cost control. While it remains uncertain whether the retailer has officially hired liquidators or will proceed in that direction, it still has the option to sell some or all of its assets or negotiate with creditors to avoid liquidation.
The company’s financial struggles have worsened since CNBC reported in late 2023 that Forever 21 was seeking rent reductions of up to 50% from landlords to cut costs. Its partnership with Shein, once seen as a potential lifeline, has yielded mixed results, according to Jamie Salter, CEO of Authentic Brands Group, which manages Forever 21.
Forever 21’s current predicament highlights the rapid evolution of the fast-fashion industry, where online-only competitors like Shein and Temu leverage advanced technology and AI to outpace traditional retailers. These companies operate without the burden of physical stores, enabling them to respond to consumer trends at unprecedented speeds.
While some industry observers have speculated that Shein might acquire parts of Forever 21 to bolster its legitimacy ahead of a planned public listing in London, sources close to Shein suggest this is unlikely due to its lack of experience in brick-and-mortar retail.
The rise of Shein and Temu echoes the earlier dominance of Amazon, which disrupted traditional retail and triggered a wave of bankruptcies and liquidations. This shift also fueled the growth of brand management firms like Authentic Brands, which acquire intellectual property from struggling companies. However, given that Authentic Brands already owns Forever 21’s intellectual property, it remains unclear who might be interested in acquiring the retailer or its assets.
“Those are often the front runners we’re seeing in some of these retail bankruptcies,” said Sarah Foss, a restructuring attorney and head of legal at Debtwire. “So it’d be interesting to see who comes forward to buy Forever 21, or pieces of it.”
— news from CNBC