Zinger Key Points
- Forever 21 is initiating an "orderly wind-down" of its business in the U.S., while its international businesses will continue to operate.
- The CFO points to intense competition from international fast-fashion retailers like Shein and Temu.
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Forever 21’s U.S. operating company announced on Sunday that it has filed for Chapter 11 bankruptcy, marking the retailer's second bankruptcy in six years.
The Details: F21 OpCo, LLC, which operates the fast-fashion retailer in the United States, said in a statement that Forever 21 is initiating an “orderly wind-down” of its business in the U.S., while its international businesses will continue to operate.
Brad Sell, CFO of F21 OpCo, pointed to intense competition from international fast-fashion retailers like Shein and Temu, operated by PDD Holdings, Inc. PDD, as one of the main factors leading to the bankruptcy.
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"While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends," Sell stated.
Shein and Temu are able to keep prices very low due, in part, to the de minimis exemption, which allows packages addressed to individuals' residences with a value of less than $800 to enter the U.S. duty-free and with less customs scrutiny.
The Biden administration attempted to close the loophole in September 2024 and issued an official statement “addressing the significant increased abuse of the de minimis exemption, in particular China-founded e-commerce platforms.”
What's Next: Forever 21's U.S. stores and website will remain operational for the time being while the company conducts liquidation sales at its stores and actively seeks a buyer for some or all of its assets.
"As we move through the process, we will work diligently to minimize the impact on our employees, customers, vendors and other stakeholders," Sells said.
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