Forever 21 Inc has finally confirmed that they have filed for bankruptcy protection after there were rumours about them doing so not long ago. In an open letter directed at their customers on Sunday (September 29th), the fashion chain said that they have voluntarily filed for bankruptcy protection under chapter 11 of the U.S. Bankruptcy Code.
Source: Complex
This makes them another one of the long list of retailers who have surrendered with high rental fees and heavy competition in the industry. Bloomberg reports that the Chapter 11 filing was done in the Bankruptcy Court for the District of Delaware.
In the court papers, it shows that Forever 21 has liabilities on a consolidated basis of between US$1bil and US$10bil (RM4.189 billion and RM41.9 billion). Although they have filed for bankruptcy, the fast-fashion retailer stresses that they are not closing down or going out of business.
Source: Business Standard
Instead, they said that they will continue operating while working out a plan to pay its creditors and turn around the business. The fashion chain, which was founded in 1984 has been going strong thanks to its cheap and trendy clothes which were founded by South Korean immigrants Do Won Chang and his wife, Jin Sook.
A Forever 21 spokesperson said that this bankruptcy filing will help them get back on their feet. This move will also see them closing down about 350 stores worldwide as they weed out the unprofitable ones. Out of these 350 stores, 178 of them will be in the U.S while the remaining ones will be from their global stores. Most of their international stores in Asia and Europe will be closed down.
The retailer has 815 stores in 57 countries and just last week, they said that they close all 14 stores in Japan at the end of October. They confirmed that they “expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S.”
Source: Forbes
Linda Chang, executive vice-president of Forever 21, said in a statement, “The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the US and abroad to revitalise our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees.” The company has obtained US$275mil (RM 1 billion) and US$75mil (RM314 million) in financing so far.
We wonder how many Forever 21 stores in Malaysia will be closed down!
Also read: Report: Forever 21 Preparing to File for Bankruptcy As Mall Sales Decline
