Forever 21 will close 200 stores as it looks to restructure its operations following its filing for bankruptcy last month.
The fast-fashion chain’s move is a last-ditch effort to restructure its business model and, hopefully, stay in business at a time when online shopping has taken the wind out of the sails of traditional brick-and-mortar stores.
Additionally, Forever 21 will leave most international markets that it operates in to focus on its US, Mexico and Latin American operations under its retooling strategy, according to reports.
Predicated on selling low-cost and trendy clothing which can be brought to market quickly, Forever 21 now joins the unenviable ranks of similar retailers Aeropostale, Wet Seal and Payless who have filed for bankruptcy this year.
The brand, which was founded in 1984, has some 800 stores with more than 40,000 employees globally.
Online companies like Missguided, Asos and Pretty Little Things have grown as quickly as the physical stores of their competitors have shrunken, catering to an increasingly digital audience that still wants stylish fast fashions but without the trek to a mall.
With a reduction in the number of stores planned, the brand will now be forced to see how best it can exit lease arrangements and close stores, the majority of which occupy rented spaces, costing some $450 million in expense annually.
According to CNN Business,“Forever 21 can reject any contracts or leases as part of the Chapter 11 (bankruptcy) process. If a lease is below market value, landlords may welcome ending it to obtain more rent from a financially healthier company.
At the same time, exiting millions of square feet of retail space would put pressure on landlords, who would have to lease as quickly as possible.”
Forever 21 was the fifth largest specialty retailer in the United States and saw peak revenue with sales of US$4.4 billion in 2015. Then, the company had a goal of becoming an US$8 billion company by 2017 but will now have to play the waiting game to see if it stays afloat with the coming changes.