Fashion retailer Forever 21 filed for Chapter 11 bankruptcy on Sunday as it joined a growing list of brick-and-mortar companies who have succumbed to the onslaught of e-commerce.
Since 2017, more than 20 US retailers including Sears Holdings and Toys 'R' Us, filed for bankruptcy as more customers shop with online retailers such as Amazon.
The company lists both assets and liabilities in the range of $1 billion (Dh3.67bn) to $10bn, according to the court filing in the US Bankruptcy Court for the District of Delaware.
The retailer said it received $275 million in financing from its existing lenders with JPMorgan Chase Bank as agent, and $75m in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.
With these funds, Forever 21 said it intends to operate business as usual and will focus on the profitable core part of its operations.
Meanwhile, the company plans to close most of its international locations in Asia and Europe, but will continue operations in Mexico and elsewhere in Latin America. The stores expect to honour gift cards, returns and exchanges.
Once popular among teenagers in the 2000s for its affordable but eye-catching designs, Forever 21’s signature bright-yellow shopping bags have become a rarer sight as Generation Z consumers – those born from 1998 onwards – shifted rapidly over to e-commerce and streetwear brands in recent years.
The bankruptcy filing could help Forever 21 get rid of unprofitable stores and raise new funds, allowing the private, family held company to restructure its flailing business for a new generation.
"The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the US and abroad to revitalise our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees," said Linda Chang, executive vice president of Forever 21.
Founded in 1984, the retailer has 815 stores in 57 countries. Last week, it said it would exit Japan, closing all 14 stores there at the end of October.
Kirkland & Ellis was serving as the company's legal adviser, Alvarez & Marsal advised on restructuring and Lazard acted as its investment banker.
