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The Tongva Times

The Tongva Times

The Tongva Times

Forever 21 files for bankruptcy

    By Lana Hy

    Copy Editor

       On Sept. 30, Forever 21, a worldwide fashion retail store that earned $4.4 billion in revenue at its peak in 2015, has filed for Chapter 11 bankruptcy, which permits businesses to continue operating despite needing time to restructure their finances in order to pay its debts. According to The New York Times, the clothing chain will cease operations in 40 countries and close up to 350 stores globally, 178 of which are located in the United States.

      “This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” stated Linda Chang, the company’s executive vice president, to NBC News.

      In early September, “Thank U Next” singer, Ariana Grande, filed a lawsuit against Forever 21 claiming “the company stole her name, likeness and other intellectual property to promote their brands for free” according to CNN.

      Although Forever 21 lost $10 million over this lawsuit, their debt goes back to when the company opened 600 new stores within 2015 to 2017. However, opening new stores did not increase profit for the brand, and the aggresive expansion eventually led to Forever 21’s bankruptcy. 

       According to Forbes, Forever 21’s sales dropped by an estimate of 25% in 2018 and co-owners, Do Won as well as Jin Sook Chang, have lost more than $4 billion in personal net worths. 

       In addition, Barbara Kahn and Ludovica Cesareo, marketing professors of The Wharton School of the University of Pennsylvania, noted that a possible reason Forever 21 filed for bankruptcy is because the company likely struggled to pay the high rents demanded by premier spots. For example, the brand’s location in Times Square, New York City is one of Forever 21’s most costly stores. 

       Furthermore, Irene Kim and Kaitlyn Wang, writers for Business Insider, stated,”Forever 21 first became popular due to its fast-fashion model. Although clothing were always mass-produced, the company was still unique since its stores sold select styles for a limited time.”

       As Forever 21 focused on growing bigger, the styles of clothing started to lack originality. As a result, the store slowly lost its trendsetter reputation while competitors such as Zara and H&M rose.

       In addition, as a traditional retailer, Forever 21 has struggled to adapt to changing consumer behaviors as e-commerce continued to boom which led to competition among internet brands like Fashion Nova as well. 

       According to CNN, millenials of people worldwide make 60% of their purchases online and prefer online shopping rather than shopping at a physical store. 

       However, bankruptcy does not guarantee the end of Forever 21. In fact, it could give the company time to close down its least profitable stores and reorganize finances.

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    Forever 21 files for bankruptcy