US fast-fashion retailer Forever 21 is reportedly set to file for Chapter 11 bankruptcy as it struggles with mounting debt and falling footfall at its largely mall-based stores.
Sources speaking to Bloomberg, which broke the news, said the retailer had come up short in a round of negotiations with lenders to restructure its debt and avoid the courts.
Forever 21 has become one of the leading fast-fashion brands to embrace licensed apparel and accessories. The retailer has launched collections of graphic tees, hoodies and swimear with brands as varied as Cheetos and Coca-Cola, to Guns N Roses, NASA, DC Comics and even the US Postal Service.
A Chapter 11 filing would allow the chain to recapitalise the business and, crucially, wriggle out of leases on stores that are unprofitable.
The chain has more than 800 stores globally – a vast network which will cost the firm a lot of money – but landlords who count Forever 21 among their biggest tenants are unlikely to take a dramatic cut in locations lying down.
Bloomberg says Simon Property Group rents 1.5 million sq.ft to the fashion retailer across 99 outlets, making it the property group’s sixth biggest tenant. And while retailers continue to pull out of malls due to soaring overheads and the end of guaranteed footfall that malls enjoyed in the past few decades, landlords are likely to fight further closures or look for ways to bridge shortfalls for struggling retailers. Simon has already come to the aid of teen fashion retailer Aeropostale when it landed in bankruptcy court a few years ago.