Forever 21 is not forever after filing for bankruptcy in changing retail landscape

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It’s a tough time to own a commercial property. Reis of Moody’s Analytics reports that the shopping center vacancy rate hit its highest level in eight years in the third quarter, at 9.4%. Retail owners are bracing for more store closures with Forever 21 filing for bankruptcy. It is the latest company to seek protection and a chance to restructure in the face of increasing online competition. debt and changing consumer tastes. Karina Huber from CGTN more.

35 years after its launch in Los Angeles, American retail giant Forever 21 declared bankruptcy in September, announcing the closure of around 350 stores in 40 countries, closing most of its operations in Asia and Europe.

The brand, which is a so-called “fast fashion” leader, has been saddled with heavy debt after an aggressive push into overseas markets.

“Forever 21 has gone from success to K-Mart’s proverbial McKinsey strategy of planting a flag in every major market in the established world and as a result has become too spread out,” said Burt Flickinger, chief executive of Strategic Resource Group. .

Forever 21, like many retailers, is struggling with rising rents. Barney’s New York recently filed for Chapter 11, in part because rent at its flagship New York store nearly doubled in January, from $16 million to about $30 million.

At the same time, some brands are struggling to stay relevant in the digital age. Children’s retailer Gymboree declared bankruptcy in January, in part due to competition from e-commerce.

2019 was a particularly brutal year for US retailers. More than 8,200 stores have closed across the United States so far and more bankruptcies are expected in what has been dubbed a retail apocalypse.

J. Crew is struggling to stay relevant to consumers, and the US owner of Ann Taylor, Loft, Lane Bryant and other retail brands is heavily in debt.

Reshmi Basu, restructuring editor at Debtwire, said many brands filing for bankruptcy don’t plan to walk away completely. The process helps them reduce costs.

“The reason a number of retailers will file for bankruptcy is because they want to throw out the leases in legal proceedings and also get a massive haircut on their debt,” she said.

Mark Greiz, marketing strategist at Mark Greiz Consulting and assistant professor at the Fashion Institute of Technology, said Forever 21 made the right choice.

“There’s a lot of fat within the organization that needs to be cut and if they cut that fat, if they go back to their fundamentals – delivering the product consumers want at a good price with a very strong digital strategy , an ‘omnichannel’ strategy – I think the brand could still reinvent itself and do quite well,” he said.

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