A MAJOR retailer is shutting down its headquarters and is preparing to close at least 200 stores – with a bankruptcy filing possible.
This will impact hundreds of Americans who will lose their jobs, in a devastating blow to the business.
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Forever 21 is at risk of a bankruptcy filing as it lays off 358 workers and shuts down it’s Los Angeles base.
A variety of managers have been given the axe, along with designers, supply chain directors and the company’s chief financial and chief merchandising officers, per USA Today.
Those who remain employed by the company will transition to remote work after the corporate headquarters closes.
A spokesperson told the outlet: “This decision was not made lightly.
“And we remain committed to transparency and fair treatment of our employees during this period of transition.”
The statement went on to say how the company is “looking at ways to reduce costs across our operations and optimize our store footprint.”
It has not been specified how many stores will close, but it has been confirmed that layoffs are scheduled for April 21.
Forever 21 has struggled in recent years to keep pace with competition such as Chinese online discount retailers Shein and Temu.
Several Forever 21 locations across the country have already announced plans to close their doors, according to loca media.
These include stores in Connecticut, California, Washington state, Pennsylvania, Idaho and North Dakota.
NOT 21 ANYMORE
While plans for the future of the company are vague, there is the possibility of a sale.
This is being looked at as an effort to avoid a bankruptcy filing.
Sarah Foss, who is head of legal at Debtwire and an expert bankruptcy lawyer, told USA Today: “Chapter 11 liquidation appears to be the most likely scenario for the retail chain as a going concern buyer for its US assets and leases has not yet emerged.
“A liquidation would have a significant impact on shopping malls nationwide which have struggled in recent years amid a shift to online shopping, as well as on Forever 21’s store employees across the country.
“The intellectual property can have significant value even as distressed sales are occurring.”
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
A sale does not necessarily mean the end of Forever 21, as it is owned by Authentic Brands Group.
The intellectual property may not be part of a sale, meaning the owners would hold onto the name Forever 21.
Five years ago, Forever 21 escaped Chapter 11 bankruptcy when it was bought Simon Property Group and Brookfield Corporation joined Authentic Brands Groups.
There’s a lot of mystery around the future of Forever 21, but it’s safe to say that not everyone is happy about how things have gone.
Jamie Salter, Authentic Brands chief executive, said during a conference in 2023 that acquiring Forever 21 was “probably the biggest mistake I made.”
More details about what stores will close, as well as exactly how many, may come in the coming weeks.
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