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Forever 21 may be heading back to bankruptcy court.
The fashion clothing retailer is mulling various options to restructure its business for its more than 360 U.S. stores, which have continued to struggle since emerging from bankruptcy five years ago. These options include filing once again for Chapter 11 bankruptcy, The Wall Street Journal reported, citing unnamed sources with knowledge of the deliberations.
Forever 21, which was bought out of bankruptcy in 2020 by mall giants Simon Property Group and Brookfield Corp. and Authentic Brands Group, tapped restructuring advisor BRG to steer through its latest struggles.
If the retailer falls again into bankruptcy, it risks having to completely liquidate the chain as other retailers have recently done, including Big Lots and teen fashion retailer Rue21, according to WSJ.
Beyond competition from other mall-based fashion retailers such as H&M and Zara, Forever 21 now has to cope with challenges from online retailers like Shein and Temu that don't have the baggage of brick-and-mortar stores.
Shein entered into a partnership with Forever 21 in 2023, but the arrangement has only yielded moderate success for the mall-based retailer, Authentic Brands CEO James Salter said at a 2024 conference, according to Retail Dive.
After its last bankruptcy, Forever 21 was initially run by a joint venture between Authentic Brands and Simon Property called Sparc Group, which last month merged with JCPenney to form a retail powerhouse called Catalyst Brands. Under the Catalyst umbrella, JCPenney also operates brands like Aéropostale, Brooks Brothers, Eddie Bauer, Nautica, Stafford and Liz Claiborne.
Forever 21 was left out of the merger.
“As previously announced, Catalyst Brands is exploring a range of strategic options for the operations of Forever 21, and we are working diligently to achieve the best possible outcome,” a Catalyst Brands spokesperson told Bloomberg in an email.
CORRECTION, FEB. 6, 5 P.M. ET: A previous version of the story failed to report that only the U.S. Forever 21 stores are considering bankruptcy. The story has been updated.
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