Forever 21, Another Fashion Retailer, Faltering

Real Estate Retail

Denies Reports Of Bankruptcy But Store Closures Are Inevitable

Forever 21 has plans to file for bankruptcy, potentially as soon as Sunday, The Wall Street Journal reported Wednesday citing anonymous sources. However, the retailer told the newspaper, as well as USA Today and other media, that it was not planning to file on Sunday, describing the report as “inaccurate” and saying it planned to continue operating the “vast majority” of its stores.

However, other reports indicate the store could close up to 700 stores. It is unclear whether the Forever 21 at the Palisades Center will be affected.

News and analysis service Debtwire reported earlier in September that Forever 21 was working with claims agent Prime Clerk in preparation of a bankruptcy and was in talks with lenders about debtor-in-possession financing.

According to Bloomberg, the fast-fashion retailer is running out of cash while talks with lenders have “so far stalled.” Talks around debt restructuring have shifted toward bankruptcy financing to take the company through Chapter 11.

A filing would “help the company shed unprofitable stores and recapitalize the business,” Bloomberg reported. Forever 21 reportedly hired restructuring advisers in June and has been mulling its options, including bankruptcy, over that time.

Many fashion retailers are suffering from falling mall traffic, heavy discounting in apparel, off-price and other discounters encroaching on their market share, shifts to e-commerce, heavy debt loads, changing habits in the apparel space and shifts in consumer spending patterns from products to experiences.

Lord & Taylor plans to close its Palisades Center location in January.

As its finances deteriorated, Forever 21 this year shut down its Chinese e-commerce site, months after also closing stores in Taiwan and France. It also sold its headquarters this year for about $166 million, according to the Los Angeles Business Journal.

That followed some years of acquisitions and expansion, including reportedly investing in Los Angeles-based apparel subscription service DailyLook last year, launching beauty brand and store banner Riley Rose, and in 2014 launching its super-cheap “F21 Red” banner.

Forever 21, founded in 1984 and with more than 800 stores, has been trying to bolster its financial position in such a way that its founding family would retain control, according to Bloomberg.