Forever 21 has become the latest retailer to file for bankruptcy protection.
Rama Venkat had the news for Reuters:
Fashion retailer Forever 21 Inc filed for bankruptcy on Sunday, as it joined a growing list of brick-and-mortar players who have succumbed to the onslaught of e-commerce companies such as Amazon.com Inc (AMZN.O).
Since the start of 2017, more than 20 U.S. retailers, including Sears Holdings Corp (SHLDQ.PK) and Toys ‘R’ Us, have filed for bankruptcy as more customers shop online and eschew large malls.
Forever 21 said the restructuring will allow it to focus on the profitable core part of its operations and shut some international locations.
“We have requested approval to close up to 178 stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords,” the company said in an email statement.
CNN’s Nathaniel Meyersohn and Chris Isidore noted:
The chain said it will file a motion to close up to 178 of its more than 800 stores, though it said in a letter to customers that “the decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords.”
“We do however expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S.,” the company said.
The ability to get out of leases and close stores at lower cost is a key advantage that the bankruptcy process affords to retailers.
Linda Chang, executive vice president for the company, said in a news release that filing for Chapter 11 is “an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21.”
Forever 21 is the latest retailer to run into trouble amid the ascendancy of online shopping that has cut foot traffic to malls and brick-and-mortar stores. High debt levels and rent costs have also burdened traditional retailers.
In recent years, even healthy retailers have closed stores and struggling ones have filed for bankruptcy.
CBS cast a look to the past:
The company once had more than 800 stores in 57 countries. According to a press release, Forever 21 obtained $350 million “to facilitate restructuring”: $275 million from JP Morgan Chase and $75 million from TPG Sixth Street Partners.
“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, Executive Vice President of Forever 21, Inc., said in a statement.
Forever 21 joins Barneys New York and Diesel USA in a growing list of retailers seeking bankruptcy protection as they battle online competitors. Others like Payless ShoeSource and Charlotte Russe have shut down completely.
So far this year, publicly traded U.S. retailers have announced they will close 8,558 stores and open 3,446, according to the global research firm Coresight Research. That compares with 5,844 closures and 3,258 openings in all of 2018.
Coresight estimates the store closures could number 12,000 by the end of 2019.
