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Still In Bankruptcy, Forever 21 De-Emphasizing Physical Stores

Bankrupt retailer Forever 21 Inc. is setting its sights on e-commerce sales outside the United States, where consumer spending is rising rapidly.

Still In Bankruptcy, Forever 21 De-Emphasizing Physical Stores

In partnership with international e-commerce platform Global-e, Forever 21 has revived its international e-commerce site, Pacific Business News reports. Its goal will be to reach consumers in the Asia-Pacific region, where spending power is predicted to rise dramatically in the coming years, as well as in Latin America and Canada.

As Forever 21 ramps up its online business, its brick-and-mortar presence is shrinking. At the time of its Chapter 11 bankruptcy in September, Forever 21 said it planned to close as many as 178 U.S. stores, along with many of its stores in Asia and Europe, though the U.S. total was later modified to about 111.

The Los Angeles-based fast-fashion retailer obtained $275M in financing from existing lenders, as well as $75M in new capital to facilitate its restructuring efforts. 

Retailers like Forever 21 have been struggling with a major decline in spending on clothes among Americans. Over the last 40 years, U.S. household apparel spending has dropped by half, from 6.2% of disposable income to 3.1%, Retail Dive reports, citing Bureau of Labor Statistics data.

Besides Forever 21, a good many other fashion retailers filed for bankruptcy in 2019, including Charming Charlies, Charlotte Russ and Gymboree, as well as  the massive liquidation of Payless ShoeSource.

The bankruptcies are part of a wider winnowing for the retail industry. According to Coresight Research, 9,302 U.S. store closures were announced in 2019 as of mid-December, up from 5,844 closures in 2018. But store openings for the year were also up, with 4,392 announced as of mid-December 2019, as opposed to 3,258 openings during 2018.

In a separate development for Forever 21, an Alabama mall owner has filed a lawsuit against the bankrupt retailer, alleging that Forever 21 lied about sales projections for a store it opened at the Eastern Shore Centre in suburban Mobile, the Los Angeles Times reports.

The landlord, Allied Development, agreed to allow Forever 21 to pay a percentage of gross monthly sales as rent, based on what the suit asserts were misleading estimates of those sales. The retailer promised at least $6M in sales in its first year, but actually tallied only $1.6M, the suit alleges.

The plaintiff is asking for damages of at least $2.1M, along with $6M in punitive damages. Forever 21 has moved to dismiss the suit.