Shopping-mall stalwart Forever 21 announced Sunday that the company has filed for bankruptcy protection.
A letter to their customers posted on the Forever 21 website reassured fans that the company wasn’t going away. “Essentially this [filing] allows Forever 21 to continue to operate its stores as usual, while the Company takes positive steps to reorganize the business so we can return to profitability and refocus on delivering incredible styles and fashion you love for many years to come,” the letter states.
According to NBC News, the company reported more than $1 billion in liabilities in the filing. Under a Chapter 11 bankruptcy, Forever 21 will have the opportunity to reorganize its debts, instead of selling off assets to repay their 100,000-plus creditors.
The New York Times reported that Forever 21 operates stores in 40 countries, and many of their non-U.S. locations are likely on the chopping block. A company spokesperson told CNBC that Forever 21 has requested approval to close up to 178 of their 549 stores in the U.S. In all, more than 350 of their 815 stores around the world could close.
Forever 21 started as Fashion 21, a small, family-run retailer in Los Angeles. Jin Sook and Do Won Chang, immigrants from South Korea, saved money from their multiple jobs to open the 900-square-foot store in 1984. They sold $700,000 of inventory their first year.
That impressive first year of sales eventually turned into $3.4 billion in revenue and thousands of employees.
The Times reported that liquidations on closing stores could begin as early as Oct. 31, though the company hasn’t announced which stores will close.
Forever 21 made its name selling trendy clothes that mimicked up-to-the-minute runway looks. The brand’s reasonable pricing attracted young shoppers eager to keep up with the latest trends. The shifting landscape of retail brought new challenges, however.
“We went from seven countries to 47 countries within a less-than-six-year time frame and with that came a lot of complexity,” said Linda Chang, Forever 21’s executive vice president, in Fast Company.
“The retail industry is obviously changing — there has been a softening of mall traffic and sales are shifting more to online,” she said.
So those iconic yellow bags aren’t going away yet — there just might be fewer of them in the years to come.