It's the last Christmas for some Forever 21 stores. Here's why the retailer went bankrupt

It's the last Christmas for some Forever 21 stores. Here's why the retailer went bankrupt
By: WNG CNBG Posted On: December 11, 2019 View: 30

It's the last Christmas for some Forever 21 stores. Here's why the retailer went bankrupt

Forever 21 has long been a staple in America's shopping malls, but after this holiday season some of its stores will go dark.

The fast-fashion retailer's rapid expansion internationally took a toll on the company and contributed to Forever 21's decision to file for Chapter 11 bankruptcy protection in September. At the time, it had more than 800 stores worldwide.

Its focus on expansion made it unable to invest in its supply chain, and so Forever 21 took more time to get fresh styles of clothes to market at a time when fast fashion was really picking up and shoppers were hungry for newness. Its sales tumbled as Forever 21 was pitted against heightened competition from rivals such as H&M and Zara.

Forever 21 also was burdened by its massive stores that can be as large as a department store, or more than 100,000 square feet. The company's founders, the Changs, wanted to open more locations quickly, and so they ended up buying bigger shops from now-bankrupt retailers such as Sears, Mervyn's and Borders.

Analysts also say Forever 21 failed to understand some of the markets outside of America as it opened more shops in places such as China and London.

During its bankruptcy proceedings, Forever 21 said it plans to exit most of its businesses overseas, in Asia and Europe. It plans to continue operating in its stronger regions of Mexico and Latin America. And it doesn't plan to exit any major markets in the U.S., though it will shut dozens of stores there.

The total number of stores that will be shuttered is unknown at this time as the company continues to negotiate with landlords.

At its peak, Forever 21 was bringing in more than $4 billion in sales annually.

Looking to the future, Forever 21 has said it wants to focus on the U.S. and making sure the quality of its clothes is up to par, which could win back shoppers.

The privately held retailer declined to participate in this video.

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