Forever 21 is requesting significant rent reductions from landlords as it faces declining sales and stiff competition in the fast-fashion market. The retailer, which operates over 380 stores in the U.S., has asked some landlords to cut its rent by as much as 50%. Despite financial difficulties, the company has not hired advisors or considered a second bankruptcy protection filing. Instead, it is focusing on restructuring leases to manage costs more effectively.
The fast-fashion market, where Forever 21 operates, is increasingly saturated. The retailer has long struggled with inventory management and responding to consumer trends. After filing for bankruptcy protection in 2019, Forever 21 was acquired by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. At the time, the company had more than 800 locations worldwide.
The retailer’s massive store footprint has been a significant burden, especially during its growth phase, when it expanded too quickly to invest properly in its supply chain and adapt to changing trends. Despite closing hundreds of stores post-bankruptcy, Forever 21’s issues remain unresolved. Its financial troubles have also impacted Sparc Group, a joint venture that includes Authentic Brands, Simon, and, more recently, Chinese fast-fashion giant Shein. Sparc operates Forever 21 and other formerly bankrupt retailers like Aeropostale, Brooks Brothers, and Lucky Brand.
Sparc has faced scrutiny over its budgets and financial struggles, particularly in merging numerous legacy brands and centralizing operations. Challenges include integrating teams, technology, marketing, e-commerce, sourcing, and supply chains. The reliance on mall-based brands has added to these difficulties. Expensive leases for underperforming stores have further strained the retailer’s finances.
Forever 21 has consistently delayed vendor payments over the past year. Data from Creditsafe shows that some bills went unpaid for more than 70 days in late 2023. While late payments are common in the industry, with the average hovering between 12 and 13 days past due, Forever 21’s financial instability is evident. The retailer now faces ultra-fast-fashion competitors like Shein and Temu, whose speed and efficiency are difficult to match.
At the ICR conference in January, Authentic Brands CEO Jamie Salter admitted that acquiring Forever 21 was a significant mistake. He underestimated the competitive threat posed by Shein and Temu. Salter advocated for a partnership with Shein, recognizing their superior supply chain and ability to rapidly respond to trends. As part of their partnership, Shein designs, manufactures, and distributes a line of co-branded Forever 21 apparel and accessories, sold primarily on Shein’s website. Forever 21 has also hosted Shein pop-up stores and begun accepting Shein returns, driving positive foot traffic.
While some industry observers speculate that Shein might eventually take over Forever 21’s stores, this is unlikely. Shein’s business model focuses on small-batch production and trend-based inventory, making it less suited for physical retail management.
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