The money woes for fast fashion retailer Forever 21 continue to get worse. Following the company’s recent bankruptcy filing, it has just been announced that a record 200 stores will close in an effort to help the brand get back on its feet.
Just last month, many were shocked to learn the news that popular fashion chain Forever 21 was officially filing for bankruptcy. Well as expected, there will be store closings as a result—but no one probably expected it to be so many. As @CNN reports, Forever 21 is closing 200 stores across the country, in the latest casualty in the retail industry.
As more consumers choose to do their shopping online, the traditional retail industry has taken several considerable hits within the last few years and sadly, Forever 21 is the latest brand to feel the sting of online competition, such as millennial favorite Fashion Nova. The store closings were decided due to multiple expensive store leases, unprofitable markets and a continuing decline in sales.
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The company is hoping that the store closings will allow it to remain in business despite being in the middle of Chapter 11 bankruptcy. Being able to get out of leases and close stores at lower cost is a key advantage that the bankruptcy process affords retailers. Since Forever 21 leases almost all its retail stores — it has 549 total U.S. stores and 251 in other countries, its annual occupancy cost is $450 million. Obviously, the company cannot afford such a high expense when overall sales are down.
Many of Forever 21 stores are located inside malls, and malls have seen a drastic decline in shoppers for the last several years. This has led to a decrease in sales through the company’s predominant retail channel. Despite efforts to adjust its sales strategy to online sales, Forever 21 remains in use of excessive floor space from leases entered a decade ago in unprofitable markets.
Following the bankruptcy, the company plans to exit most international markets, including Canada, Europe, and Asia, and instead focus on a smaller store base in the U.S., Mexico and Latin America.
Roommates, what are your thoughts on this?
