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New York (CNN Business) - Forever 21, the adolescent clothing empire that experienced the rise and fall of US malls, reported Sunday that it had declared bankruptcy.
The chain said it will present a motion to close up to 178 of its more than 800 stores, although, in a letter to its customers, it said that “decisions on which national stores will be closed are ongoing, pending the outcome of ongoing talks with the owners. "
"However, we expect a significant number of these stores to remain open and operate as usual, and we do not expect to leave any major market in the United States," the company said.
The ability to leave leases and close stores at a lower cost is a key advantage that the bankruptcy process offers to retailers.
Linda Chang, the company's executive vice president, said in a press release that filing for bankruptcy is "an important and necessary step to secure the future of our company, which will allow us to reorganize our business and reposition Forever 21".
Forever 21 is the last retailer to have problems amid the growing popularity of online shopping that has reduced pedestrian traffic in shopping centers and physical stores. High levels of debt and rental costs have also burdened traditional retailers.
In recent years, even healthy retailers have closed stores and those who fight have declared bankruptcy.
"Retailers who rely on debt to finance their growth have always been particularly susceptible to the slowdown," said Greg Portell, a leading partner in the global consumer and retail practice of the consulting firm AT Kearney.
So far this year, retailers in the United States have announced more than 8,200 store closures, which already exceeded last year's total of 5,589, according to Coresight Research. Payless and Gymboree declared bankruptcy for the second time, closing almost 3,000 stores between them.
More retail stores are expected to close and reach 12,000 by the end of 2019, according to a Coresight prediction.
Forever 21 was founded in 1984 in a small store in Los Angeles by South Korean immigrants Do Won Chang and his wife, Jin Sook. The chain quickly expanded into suburban shopping centers and served girls and young women with a combination of low-cost basics. The company perfected the fast fashion model, attracting customers with its updated clothing mix more frequently than was offered in department stores or unique brands.
“We receive new products every day. With most mall stores, it's usually one or two days a week, ”said a store manager in 2001.“ We always have the newest styles. ”
The chain built huge stores, such as its four-story flagship and 151 testers in the heart of New York's Times Square. And although many retailers began reducing their network of stores in recent years, Forever 21 continued to add stores as recently as 2016.
Traditional retailers that specialize in selling clothes to teenagers and young adults have had problems in recent years. fashion cycles are shortened and younger shoppers switch from the mall to online shopping.
"The combination of fast fashion and acceleration of supply chain speeds has exacerbated that risk by increasing the chances of a retailer reading the trends poorly and losing multiple trend cycles," Portell said.
Wet Seal, American Apparel and Delia filed for bankruptcy and closed all their stores for the past five years. Aeropostale declared bankruptcy in 2016, but has kept some stores open. Charlotte Russe also filed for bankruptcy this year.
Many retailers have had problems after being bought by private equity companies or hedge funds, which accumulated debts. Forever 21, on the other hand, is still owned by its founders.
Forbes lists Won and Chang with a net worth of $ 1.5 billion, and the company itself with annual sales of $ 3.4 billion and 30,000 employees.