Fashion retailer Forever 21 lodges for Chapter 11 bankruptcy protection in the US

Forever 21, the California-based fashion retailer has lodged for bankruptcy protection on Sunday in Wilmington, Delaware.

The Chapter 11 bankruptcy filing allows Forever 21 to continue operating as it plans to close unprofitable outlets across the US. The firm said that it plans on exiting most of its international outlets in Europe and Asia. However, it would continue operating in Latin America and Mexico.

The iconic teenage clothing brand expects to shut around 350 stores globally, said a spokesperson, including at least 178 US outlets.

The company sells affordable, trendy accessories and clothes and competes with brands like H&M and Zara. However, a few analysts say that the firm has been off-track over the last 5 years.

Moreover, it has lost its youth fan following searching for comparatively cheap clothing. Besides, the company, just like other fashion retailers, experienced heavy competition posed by online outlets.

The Chapter 11 filing postpones Forever 21’s obligations towards its creditors, thus providing it time for strategizing its debts and repositioning the business.

All being said, Forever 21 employs around 6,400 fulltime and 26,400 part-time staff, as per the filing. The retailer has lodged a motion in the court asking permission for paying the workers.

Meanwhile, as a part of the filing, Forever 21 has garnered $275mn as financing from its existing creditors as well as $75mn as a new capital.

In a statement, the spokesperson said that the company is expected to have 450 to 500 outlets worldwide post this process. The retailer doesn’t expect to leave any key US markets, the spokesperson added.

The filing is a decisive and deliberate step to place the firm on the path of success for the coming future, said the spokesperson.

Forever 21, in one public letter, assured its loyal customers saying the outlets are open and would continue to feel just like a regular day.