Several reports have come out in the past week revealing that the teen clothing store Forever 21 is about to declare bankruptcy. The company has about 800 stores all over the world and up until 2016 was growing, adding stores when many other retailers were scaling back and closing down. Online shopping has really hit the industry hard and Forever 21 appeared to be one of the survivors.
Now, it appears as if trying to expand has backfired and the retail apocalypse has come knocking on their door. This is by no means the end of Forever 21, but it allows them the opportunity to start scaling back. When a retail store declares bankruptcy, one of the advantages they have is the ability to close stores and get out of their binding leases.
Stores that cater to the needs of teens and young adults appear to be facing an onslaught of closures. Teenagers don’t go to the mall as they once did as traffic in these stores is noticeably lighter. The younger generations are instead turning towards apps on their phone to shop and order clothes they want. As Amazon grows and expands, more brick-and-mortar shops close up.
Modern-Day Bankruptcy Woes
It’s not just slumping sales impacting the clothing industry. Several other retailers ran into problems because they were bought up by private equity firms. Teen and young adult stores like American Apparel, Delia’s, and Wet Seal have also filed for bankruptcy for this reason. Yet, Forever 21 is still a private company owned by their founders.
Do Won and Jin Sook Chang are a married team who came to the U.S. from South Korea in 1981. It wasn’t but a few short years later when Forever 21 was born. Their first store was centered in Los Angeles, purchased with only $11,000 in their bank. Now they’re considered billionaires, worth $1.5 billion together according to Forbes and employ 30,000 people.
Do Won Chang has been considering whether it’s time to finally restructure, but they only want a deal that will allow them to keep full control of their baby. By making this a deal breaker, Chang has essentially kept anyone from stepping in and providing the funds they are looking for to make the changes.
“We’ll work together on other distressed situations, and let’s face it, there are some out there,” Simon said. “But we’re only going to buy into companies that, we think, have brands and that the volume that is worth doing it.”