Empire State Review Team 
Forever 21 Faces Bankruptcy: What It Means for Gift Cards
NORTHBROOK, Ill. – Customers holding Forever 21 gift cards or store credit should be aware that these will expire by the end of Tuesday, as the company has ceased accepting returns following its recent bankruptcy filing.
The Bankruptcy Context
Forever 21 has entered Chapter 11 bankruptcy protection for the second time since its initial filing in 2019. The retailer is set to close its U.S. operations due to dwindling mall traffic and increasing competition from online retailers like Amazon, Shein, and Temu.
Understanding the Corporate Structure
F21 OpCo, which oversees Forever 21, is planning to wind down U.S. operations while exploring options to either partner with another entity or sell off its assets entirely. The future of the brand remains uncertain as officials strategize the next steps.
The Initial Bankruptcy and Subsequent Developments
Forever 21’s initial bankruptcy in 2019 led to its acquisition by a consortium that included Authentic Brands Group alongside major mall operators like Simon Property Group and Brookfield Property Partners. In early January, Sparc Group, the parent company of Forever 21, merged with JCPenney, forming a conglomerate known as Catalyst Brands, which manages a portfolio of brands including Aéropostale and Eddie Bauer.
Recent Collaborations and Sales Strategies
In 2023, Forever 21 partnered with Shein, allowing the latter to sell Forever 21 items, alongside facilitating returns for Shein purchases at select Forever 21 stores. Despite these innovative strategies, the long-term outlook for Forever 21 appears bleak.
Statements from Leadership
Chief Financial Officer Brad Sell stated, “While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin.”
Future Plans and Operations
As the liquidation process begins, Forever 21 plans to conduct clearance sales in its U.S. locations while maintaining website operations until further notice. However, it is important to clarify that international stores, operated by various licensees, will not be affected by this bankruptcy filing and will continue functioning normally.
Retail Landscape Challenges
The challenges facing Forever 21 underscore a broader trend among retailers struggling with e-commerce competition and a slowdown in consumer spending. Other companies, such as Joann Inc. and Party City, have also filed for bankruptcy amid similar pressures.
The Retail Evolution
Founded in 1984, Forever 21 gained popularity among young consumers during the 1990s, thriving as a fast-fashion retailer. However, aggressive expansion has led to challenges as the market shifted towards online shopping, where competitors like Shein and Temu offer cheaper alternatives, such as T-shirts priced significantly lower than Forever 21.
Market Analysis
Neil Saunders, managing director of GlobalData, remarked that Forever 21’s physical stores are larger than necessary for its current demand, often housed in malls with insufficient foot traffic. He noted, “Forever 21 was always a retailer living on borrowed time. Over recent years it has been hit with dual headwinds from a weak apparel market and stiff competition from cheap Chinese marketplaces.”
Conclusion
As Forever 21 winds down its operations in the U.S., customers are urged to utilize any remaining gift cards before their expiration date. This closure illustrates the shifting dynamics in the retail space, prompting ongoing discussion about the future of brick-and-mortar stores amid growing online competition.
The Source: The Associated Press contributed to this report. This story was reported from Los Angeles.
