Forever 21 Plunges into Bankruptcy Again, Facing $1.6 Billion Debt and Potential Store Closures
America ı By Samuel Lopez
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Key Insights:
- Iconic fashion retailer Forever 21 files for Chapter 11 bankruptcy, saddled with a $1.58 billion debt.
- The fashion giant may close all 354 U.S. stores unless it secures a last-minute buyer.
- Inflation, mall decline, and online competition—especially from tariff-exempt platforms like Shein and Temu—cited as major factors in financial struggles.
By Samuel A. Lopez – USA Herald
[DELAWARE] - Forever 21, the once unstoppable force in fast fashion, finds itself back in Chapter 11 bankruptcy protection, confronting an overwhelming debt of $1.58 billion. In a stark admission, the retailer's U.S. operator, F21 OpCo, announced plans to wind down operations at its 354 American locations unless it swiftly secures a buyer willing to continue its legacy.
In documents filed late Sunday in Delaware bankruptcy court, Forever 21 cited a severe slowdown in business exacerbated by declining mall traffic, aggressive competition from online retailers, and persistently high inflation that has dramatically elevated operating costs. This marks the second time in recent years that the fashion behemoth has turned to bankruptcy court for relief, following its previous restructuring in 2019.
Founded in 1984 and headquartered in Los Angeles, Forever 21 has been synonymous with trendy, affordable fashion. However, its reliance on brick-and-mortar mall locations has increasingly hampered growth amidst an evolving retail landscape. Post-pandemic, malls have experienced a significant reduction in foot traffic, severely impacting retailers dependent on physical storefronts.
F21 OpCo emphasized in court documents how high inflation starting in 2021 significantly raised costs for materials and labor, creating financial hurdles too substantial to overcome. Despite attempts to streamline operations, the company has been unable to offset persistent losses. Over the last three fiscal years, Forever 21 hemorrhaged more than $400 million, including a staggering $150 million in losses during 2024 alone, underscoring the depth of its financial crisis.
Forever 21's struggle has been compounded by intense competition from international online competitors. In court filings, Stephen Coulombe, F21’s co-chief restructuring officer, highlighted the detrimental impact of online retailers exploiting a U.S. tariff exemption known as the "de minimis exemption," which allows imported goods valued below $800 to bypass tariffs and import duties.
"Certain non-U.S. online retailers that compete with the debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers," Coulombe explained. "Retailers that must pay duties and tariffs to purchase products for their stores and warehouses in the United States, such as the company, have been undercut."
This loophole has allowed rivals like Shein and Temu to aggressively price their offerings, enticing consumers away from traditional retailers burdened by higher costs.
As part of its bankruptcy strategy, Forever 21 has entered a "plan support agreement" with secured lenders, which outlines a dual-path approach: conducting liquidation sales across its U.S. stores while simultaneously pursuing potential buyers interested in purchasing the company as an ongoing concern.
For now, Forever 21's website and physical stores in the U.S. will remain operational as the company initiates the wind-down process. International locations are not part of these bankruptcy proceedings, providing a glimmer of continuity for the brand abroad.
The bankruptcy filing has its initial hearing set before U.S. Bankruptcy Judge Mary F. Walrath, scheduled for Tuesday at 11 a.m. EST.
Forever 21 previously navigated bankruptcy in 2019, emerging through a sale to an investor consortium including Simon Property Group, Brookfield Property Partners, and Authentic Brands Group, finalized in 2020. Yet, the relief was temporary, as pandemic-induced economic disruptions and subsequent inflationary pressures rapidly eroded the retailer's recovery.
Forever 21's bankruptcy proceedings are overseen by U.S. Bankruptcy Judge Mary F. Walrath, a respected jurist known for handling complex Chapter 11 cases. Legal representation for Forever 21 includes Young Conaway Stargatt & Taylor LLP attorneys, with expertise provided by bankruptcy specialists familiar with retail restructuring.
The case, formally identified as F21 OpCo LLC et al., case number 1:25-bk-10469, is pending in the U.S. Bankruptcy Court for the District of Delaware.
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