Once-popular fast-fashion retailer, Forever 21 may be forced to file for Chapter 11 bankruptcy if it fails to secure a buyer for its profitable leases, according to reports in the Wall Street Journal.
Forever 21's operating company, Catalyst Brands licenses the brand in the US from Authentic Brands Group, which retains ownership of the intellectual property. The brand currently operates over 360 U.S. stores but has struggled since emerging from bankruptcy five years ago. According to a company spokesperson, Catalyst Brands is exploring strategic options for Forever 21 and working towards the best possible outcome.
Formed in January through the merger of Sparc Group (operator of Forever 21, Lucky Brand, Eddie Bauer, Aeropostale, and Brooks Brothers) and JCPenney, Catalyst Brands is at the center of these developments. Authentic Brands Group acquired the Forever 21 brand out of bankruptcy in 2020 and licensed it to Sparc Group.
Earlier this month, Jamie Salter, CEO, Authentic Brands Group discussed the brand's partnership with online giant Shein, noting that while online sales through Shein were ‘good but not great,’ in-store Shein pop-ups within Forever 21 stores had been ‘huge home runs.’ Currently preparing for an IPO, Shein owns a one-third stake in Sparc Group and Authentic Brands Group's joint venture.
Sparc Group also holds a minority share in Shein. The Group typically invests in struggling retailers, often keeping well-known brands within Simon Property Group's malls. The partnership between Shein and Sparc Group aims to leverage their respective strengths to drive innovation, explore new strategies, improve customer experience, and expand market presence.
Founded in 1984 by Korean immigrants, Forever 21 became a popular destination for affordable, trendy clothing. However, declining mall traffic and the shift to online shopping led to slumping sales. Forever 21's aggressive expansion, from 500 stores in 2010 to 800 in 2018 across over 40 countries, ultimately proved unsustainable. The company's strategy of targeting vacant department store spaces backfired as it faced financial difficulties.
