Following reports earlier this month that a bankruptcy for the fast-fashion pioneer was imminent, Forever 21 filed for Chapter 11 protection in Delaware Sunday night, becoming the latest brick-and-mortar retailer to succumb to the Amazon-driven ‘retail apocalypse’, Bloomberg reports.
In addition to the competition from e-commerce retailers, BBG said Forever 21 struggled with high rents and heavy competition from other fast-fashion rivals (like H&M and Zara).
Court papers show Forever 21 has estimated liabilities (on a consolidated basis) of between $1 billion and $10 billion. Thanks to Chapter 11 protection, Forever 21 will continue operating as it works out a plan to pay back all of its creditors.
Part of that plan, again, according to the filings, will likely involve closing as many as 350 of its more than 800 stores around the world. Most of the closures will focus on Asia and Europe: The company has earlier announced plans to shutter all 14 of its Japanese stores. Meanwhile, its operations in Mexico and Latin America will continue, according to Reuters.
This means that nearly half of the chain’s 30,000 employees could lose their jobs.
Even before the Forever 21 bankruptcy, the ~11,000 announced and completed store closures in the US were already on track to exceed to the totals from the past few years. One research shop projects annual closures in 2019 to hit 12,000 by year end.
Analysts at Goldman Sachs estimate that $7.5 billion of ‘sales opportunity’ will arise from store closures in 2019 as liquidation sales pull some demand forward.
Meanwhile, Goldman believes the shift to e-commerce will continue: “We believe e-commerce growth will likely accelerate over the course of the second half as a record number of retail store closures, initiatives around fulfillment such as Amazon’s $800 million investment in same-day delivery and Etsy’s move to free shipping…will drive more consumers to shift purchases online.”
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