Popular fashion retailer Forever 21 said on Sunday that it has filed for bankruptcy protection, joining a growing list of brick and mortar retailers succumbing to heavy competition from e-commerce sites and high rent. Forever 21 has stated that it plans to close most of its stores in Asia and Europe. It, however, plans to continue its operations in Mexico and Latin America.
This move put a question on the future of Forever 21 in India. However, Aditya Birla Fashion that runs the India operations stated that Forever 21 brand in India will not be impacted. "Forever 21's India business is run as a franchise operation by Aditya Birla Fashion and Retail Limited. The business operations of the brand in India will not be impacted in any way by its restructuring underway in the US," said a company spokesperson, as mentioned in a report in Livemint.
Forever 21 had said last week that it would exit Japan and close all of the 14 stores at the end of October.
Forever 21 had received $275 million from existing lenders JP Morgan Chase Bank, NA and $75 million in new capital from TPG Sixth Street Partners. It has listed both assets and liabilities in the range of $1 billion to $10 billion, as per the court filing in the US Bankruptcy Court for the District of Delaware.
"The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the US and abroad to revitalise our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees," said the firm in a statement.
The company has filed for Chapter 11 bankruptcy, available to every business under the bankruptcy laws of United States. Under Chapter 11 bankruptcy, a business is allowed to reorganise under US bankruptcy laws. This bankruptcy chapter is different from Chapter 7 where the business ceases operations, all the assets are sold and proceeds handed over to creditors. Chapter 11 bankruptcy can result in three outcomes - reorganisation, conversion to Chapter 7 bankruptcy or dismissal.
Founded in 1984, the company once had 800 stores in 57 countries. According to the website, the average Forever 21 store is 38,000 sq ft, the largest is approximately 162,000 sq ft and the original Fashion 21 store is only 900 sq ft.
Since 2017, more than 20 US retailers including bigwigs like Toys 'R' Us have filed for bankruptcy.