The U.S. branch of Forever 21 filed for bankruptcy on Sunday in a Delaware court, citing intense competition from international brands exploiting the de minimis import loophole.
F21 OpCo, the company that operates Forever 21’s roughly 350 U.S. stores, said in a statement that its U.S. stores and website will remain operational for now but that it plans to undergo an “orderly wind-down” of its domestic business.
The de minimis rule allows duty-free entry into the United States of any goods priced under $800 shipped to individual buyers—a trade provision that Chinese retailers such as Shein and Temu have benefited greatly from, especially during the pandemic when online shopping boomed. Meanwhile, and much to the detriment of U.S. retailers who are charged customs duties for imported goods.
Sell further cited “rising costs, economic challenges impacting our core customers, and evolving consumer trends.”
The Chapter 11 bankruptcy filing allows F21 OpCo to stay afloat for now while employees continue to receive wages and benefits as usual for as long as their employment lasts.
The company said it will ask the court for permission to sell its assets through an auction.
In the event of a successful sale, “the Company may pivot away from a full wind-down of operations to facilitate a going-concern transaction,” F21 OpCo said.
This marks the second time in six years that the fast-fashion retailer filed for bankruptcy.
Forever 21 was founded in 1984 by Do Won Chang and Jin Sook Chang, a South Korean immigrant couple, in Los Angeles. The business was an instant hit among young shoppers looking for cool, trendy, and affordable clothing.
The clothing chain currently has more than “540 locations globally and online,” according to Forever 21’s website. At its peak, the company operated 800 locations worldwide.
Forever 21 stores not based in the United States are not affected by F21 OpCo’s bankruptcy filing.
