Forever 21 Seeks Bankruptcy Protection Amid Retail Struggles

Second Chapter 11 Filing Signals Major Shift for Fast-Fashion Giant

Forever 21's U.S. operating company has filed for Chapter 11 bankruptcy protection, marking its second such filing in six years and spotlighting the ongoing challenges faced by the fast-fashion retail sector. This move, prompted by declining mall traffic and fierce competition from online retailers, suggests a potential liquidation for the company, which has been unable to secure a buyer for its approximately 350 U.S. stores. Despite the filing, Forever 21 plans to keep its U.S. stores and website operational, serving customers while conducting liquidation sales and pursuing a court-supervised sale of its assets. International operations remain unaffected, offering a glimmer of stability amid the turmoil. The filing, lodged in the U.S. Bankruptcy Court for the District of Delaware, lists estimated assets between $100 million and $500 million, with liabilities ranging from $1 billion to $10 billion, and creditors numbering between 10,001 and 25,000, painting a stark picture of financial distress for the once-thriving retailer.

Founded in 1984 by South Korean immigrants in Los Angeles, Forever 21 carved out a niche as a leader in affordable, trendy clothing, appealing to young shoppers hunting for stylish bargains. By 2016, the company boasted around 800 stores worldwide, including 500 in the U.S., capitalizing on the heyday of American mega malls. However, the retail landscape has since transformed dramatically, with the rise of e-commerce and fast-fashion competitors like Shein, Temu, Zara, and H&M reshaping consumer habits. The slow decline of mall culture, coupled with a growing preference for sustainable fashion among younger generations, has eroded Forever 21's market position. This latest bankruptcy filing follows a previous Chapter 11 filing in 2019, after which the company was acquired by Sparc, a joint venture between Authentic Brands Group and mall operators Simon Property and Brookfield Asset Management. Now owned by Catalyst Brands, formed through a January 2025 merger of Sparc Group and JC Penney, Forever 21 faces an uncertain future, with its trademark and intellectual property still held by Authentic Brands Group, potentially allowing the brand to persist in some form even if its U.S. operations wind down.

The financial details of this bankruptcy filing underscore the severity of Forever 21's predicament. With liabilities vastly outweighing assets, the company is navigating a complex restructuring process involving thousands of creditors, including suppliers, landlords, and other stakeholders. The decision to conduct liquidation sales while simultaneously marketing its assets reflects a dual strategy: maximizing value through asset sales while leaving room for a possible going-concern transaction if a buyer emerges. This approach mirrors broader trends in the retail industry, where traditional brick-and-mortar stores grapple with adapting to a digital-first world. Reports from early 2025 indicated Forever 21 was already closing up to 200 stores and exploring a shift to a digital-first model, yet these efforts appear insufficient to stave off this latest financial blow. The potential closure of all 350 U.S. stores could ripple through the retail ecosystem, further straining shopping malls already hit hard by reduced foot traffic and signaling a challenging year ahead for legacy fast-fashion retailers.

Ownership dynamics add another layer of intrigue to Forever 21's bankruptcy saga. Catalyst Brands, the current parent entity, emerged from the merger of Sparc Group and JC Penney, a department store chain owned by Simon Property Group since 2020. Meanwhile, Authentic Brands Group retains control of Forever 21's trademark and intellectual property, a separation that could prove pivotal. Even if the operating company liquidates, the brand's identity might endure through licensing agreements or partnerships with other retailers, a strategy Authentic Brands has employed with other distressed brands. CEO Jamie Salter's candid admission last year, labeling the Forever 21 acquisition as "the biggest mistake I made," highlights the difficulties of managing a brand caught in the crosshairs of retail evolution. This intellectual property retention offers a potential lifeline, suggesting that while the physical stores may vanish, the Forever 21 name could live on in a reimagined capacity.

The broader implications of Forever 21's bankruptcy filing resonate across the fast-fashion retail landscape. The filing aligns with industry forecasts of continued store closures in 2025, driven by relentless online competition and changing consumer priorities. Unlike its 2019 bankruptcy, which resulted in a sale to Sparc and a focus on core profitable stores, this filing carries a higher risk of full liquidation, given the absence of a buyer and the scale of liabilities. The company's earlier exit from 40 countries and closure of 178 U.S. stores in 2019 trimmed its footprint, but the persistent decline in mall-based retail has outpaced these adjustments. For stakeholders, including employees, mall operators, and creditors, the coming weeks will be critical as the court-supervised sale process unfolds, determining whether Forever 21 can pivot to a sustainable model or face a complete wind-down of its U.S. operations.

Forever 21's journey from a mall staple to a bankruptcy filer reflects the seismic shifts in retail over the past decade. The interplay of e-commerce growth, declining physical retail traffic, and evolving fashion trends has left little room for error in the fast-fashion sector. While the brand's U.S. stores hang in the balance, its international operations and intellectual property provide avenues for resilience. Whether through a last-minute buyer or a reimagined brand strategy, the next chapter for Forever 21 hinges on its ability to adapt to a retail world that has moved beyond the mega-mall era it once dominated. For now, the focus remains on liquidation sales and asset marketing, with the fast-fashion retailer's fate resting on the outcome of this high-stakes bankruptcy process.