*On Forever 21 bankruptcy: Big stores, small crowds

Forever 21 joined the ever-growing numbers of apparel retailers that have filed for bankruptcy — a list from which few clothiers have bounced back. The Los Angeles company is a leading player in fast fashion, where it quickly updates its moderately priced inventory to keep pace with the latest trends, and with 800 stores — many of them exceptionally large — it’s become a familiar anchor tenant in shopping malls.

But Forever 21 fell victim to a combination of slower mall traffic, dissatisfaction with its clothes, its own over-expansion and the ongoing consumer shift to online shopping, all of which created a cash crunch that forced the firm to file for Chapter 11 bankruptcy on Sunday.

Under Chapter 11, Forever 21’s debts are frozen while it continues operating and works out a reorganisation plan. Its plan calls for closing about 350 stores — including 178, or one-third, of its 549 US outlets. Forever 21 hasn’t yet revealed which stores will be shuttered.

The firm’s 44 Canadian stores, and most of its outlets in Asia and Europe, also will be closed.

The privately owned chain also said it had secured $350 million in restructuring financing to help it reorganise and prepare for the critical holiday shopping season.

Forever 21 is the latest, and one of the largest, retailers to seek bankruptcy in the last two years.

Many are traditional operators of brick-and-mortar stores, such as Toys R Us and Sears Holdings, which have been hit hard by consumers’ increasing shift to e-commerce.

In the apparel sector they include American Apparel, Rue21, Payless Shoe Source, Charlotte Russe, Wet Seal, BCBG Max Azria, Gymboree and True Religion.

The bankruptcies are a key reason why US retailers have closed 8,567 stores so far this year, up 47 per cent from the 5,844 outlets closed in all of 2018, according to Coresight Research.

Forever 21 said its reorganisation would leave the chain “better positioned to prosper for years to come.”

But some analysts said that while Chapter 11 would help the company right itself financially,forever 21 still faces the challenge of rebuilding its brand so that it can grow again one day.

“It is possible to come back but it’s rare,” said Ronald Friedman,co-head of the retail practice at Marcum, an accounting and advisory firm.

Forever 21 is owned by husbandand-wife team Do Won Chang and Jin Sook Chang, who started with a single store in Los Angeles’ Highland Park neighbourhood in 1984 and grew it to a global fashion staple with annual sales of about $3 billion.

The retailer was known for providing tops, pants and other apparel — typically for $20 or less each — to teenage buyers who were constantly searching for the latest trends, often because they were influenced by their favourite celebrities on social media.

Two other big chains, H&M and Zara, also compete with Forever 21 in the fast-fashion sector.

Forever 21 was unique in that it pursued massive stores, often with 38,000 or more square feet, many of which it obtained after the severe recession in 2008-09 when some department stores sought bankruptcy

FOREVER 21 FELL VICTIM TO A COMBINATION OF SLOWER MALL TRAFFIC, DISSATISFACTION WITH ITS CLOTHES, ITS OWN OVER-EXPANSION AND THE ONGOING CONSUMER SHIFT TO ONLINE SHOPPING

or liquidation.

The recession also heightened Forever 21’s appeal as consumers looked for low prices.

To help fill those big stores, Forever 21 eventually broadened its lines of merchandise to include menswear, children’s clothing, maternity and plus-size apparel, cosmetics and other items. But that expansion turned off a good number of its core young apparel buyers, analysts have said.

That exacerbated the damage Forever 21 suffered from the overall slowdown in foot traffic at shopping malls that’s bedevilled retailers of all stripes, as buyers increasingly shift to purchasing online.

“The brick-and-mortar retailers that relied on you to being in the store to capture your sales, even with large inventories, are now susceptible to how those shopping patterns are changing,” said Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University.