Fast-fashion retailer Forever 21 filed for bankruptcy late on Sunday, joining a growing list of brick-and-mortar companies that have seen sales hit by the rise of competition from online sellers like Amazon.com Inc and the changing fashion trends dictated by millennial shoppers.
Younger, more environmentally conscious shoppers are also choosing brands that ethically source garments instead of retailers that use cheap fabrics to make T-shirts that are snapped up for $5. Resale sites like thredUp.com, which calls itself the largest online thrift store, are also growing in popularity.
It has requested court approval to close up to 178 U.S. stores outside of its major markets.
On its website on Monday, Forever 21 sales included tops that started at $3 and dresses, handbags and jewelry and pants for $20 and under.
Gabriella Santaniello, founder of retail research firm A-Line Partners, said the bankruptcy would likely create pressure on other clothing retailers as Forever 21 slashes prices to clear inventory.
She said the chain did little to differentiate itself from others.
“They used to have a bit of an older customer, but customers have become more conscious of where they spend their dollars. They want sustainability, they want to feel represented and I don’t think Forever 21 particularly stood for any of this,” she said.
Shortly after it opened on Monday, there were a few shoppers browsing the racks of sweaters, flannel shorts and furry jackets at a store in downtown Chicago.
“I mean, I don’t really care if they close…I don’t shop here enough that it matters,” said National Louis University student Jennifer Ramirez, 19.
Jennifer Thurmond, 46, said she was optimistic the chain could turn itself around if Forever 21 was able to keep its fashions current and keep prices reasonable.
Retail analysts said Forever 21’s low prices and extremely large stores may also be a cause of its financial trouble.
“Forever 21’s large stores have been the key to their downfall. How can you have profitability on sales per square foot with these large stores,” said Jane Hali, at research firm Jane Hali & Associates.
Fast-fashion rivals H&M and Zara have never had stores as large as Forever 21 and Zara only has about 85 stores in the United States, she noted.
Founded in 1984 and headquartered in Los Angeles, Forever 21 said it will close most of its stores in Asia and Europe but would continue operations in Mexico and Latin America.
Since the start of 2017, more than 20 U.S. retailers including Sears Holdings Corp and Toys ‘R’ Us have filed for bankruptcy as more customers shop online and eschew large malls.
Forever 21 also said on Sunday its Canadian subsidiary filed for bankruptcy and it plans to wind down the business, closing 44 stores in the country.
“Slimming down the operation and reducing costs is only one part of the battle. The long-term survival of Forever 21 relies on the chain creating a sustainable and differentiated brand,” Saunders said.
Forever 21 lists both assets and liabilities in the range of $1 billion to $10 billion, according to the court filing in the U.S. Bankruptcy Court for the District of Delaware.
The retailer, which filed to reorganize under Chapter 11 bankruptcy protection, said it received $275 million in financing from its existing lenders, with JPMorgan Chase Bank NA as agent, and $75 million in new capital from TPG Sixth Street Partners and certain of its affiliated funds.
April Stanton, 33, a Forever 21 fitting room attendant at the Chicago store shrugged off the bankruptcy.
“We’re still making money. We make our daily sales goals here,” Stanton said.