Fashion retailer giants Forever 21 has petitioned for Chapter 11 bankruptcy, joining the list of retailers who have failed to explore the move towards online purchasing.
Since the beginning of 2017, around more than 20 US retailers, including Sears Holdings Corp and Toys ‘R’ Us, have petitioned for bankruptcy as more clients shift to online retailers, for example, Amazon.
Forever 21 was founded in 1984, in a small store in Los Angeles by South Korean immigrants Do Won Chang and his better half, Jin Sook. The chain extended rapidly in suburban shopping centers and provided ladies and young teens with an inexpensive blend of clothing-line.
Forever 21 have 815 stores in 57 nations. The chain assembled large stores, similar to its four-story, 90,000-square-foot flagship with 151 fitting rooms in New York’s Times Square. Forever 21 continued adding new stores as of late as 2016. In a span of few months, conventional shopping battled and faced significant loss as the selling of garments to teenagers and high school crowd shifted from shopping malls to online shopping. The CNN Business reported.
As indicated by CNBC news, a couple of months back in May, Forever 21 stated it would leave Japan and close 14 stores towards the end of October. The company intends to close most of its locations in Asia, and Europe and close up to 178 stores from the total number of 800 stores; however, it will keep on working in Mexico and Latin America.
The company shows the two assets and liabilities in the range of $1bn to $10bn, as indicated by the court petition in the US chapter 11 court for the District of Delaware.
The retailer announced it got $275m in financing from its current lenders with JPMorgan Chase Bank as an operator, and $75m in new capital from TPG Sixth Street Partners, and a portion of its associated assets.
With these funds, Forever 21 announced it expected to work the same as previously and would concentrate on the beneficial part of its operations.
In the past month of June, Forever 21 was reviewing reconstruction options to support its liquidity as it grappled with its business, an individual acquainted with the situation told CNBC.
There are vast numbers of the most agitated retailers, like Forever 21, who are situated in malls, where fewer customers are spending their cash. As sales decrease, the companies are getting burdened with the maintenance of large stores.
Forever 21 have more than 815 stores in the US and around the world and are now on the verge of closing down most of its stores.
Teenage garments retailers have gotten themselves, especially powerless against the retail change. Many of them have sought financial protection in the course of recent years, including Aeropostale, American Apparel, and Rue21.
The company said the capacity to escape rents and close stores at a lower cost is a favorable critical position that bankruptcy process allows to retailers.
Linda Chang, the official VP for the company, stated in a news release that petitioning for Chapter 11 is “a significant and important advance to verify the eventual fate of our Company, which will empower us to revamp our business and reposition Forever 21.” CNN Business reported.