The fast-fashion retailer has already begun liquidation sales at its more than 350 U.S. locations while still hoping a buyer might emerge to continue operations. Court documents reveal the company contacted over 200 potential bidders with 30 signing confidentiality agreements, but no viable deal materialized.
Stephen Coulombe, the company's co-chief restructuring officer, directly blamed the retailer's struggles on foreign competitors exploiting trade loopholes. "Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers," Coulombe stated in court filings.
The "de minimis exemption" allows goods valued under $800 to enter the U.S. without import duties - a policy President Trump is attempting to eliminate. This advantage has created what Coulombe called an uneven playing field that "materially and negatively impacted" Forever 21's business.
Despite generating $2 billion in revenue and $165 million in EBITDA during fiscal 2021, the company's performance deteriorated amid rising competition, inflation, and supply chain challenges. In the past three fiscal years, Forever 21 lost over $400 million, including $150 million in fiscal 2024 alone.
Current financial obligations include $1.58 billion in various loans and more than $100 million owed to dozens of clothing manufacturers primarily in China and Korea.
The bankruptcy doesn't signal the complete end of the brand. Forever 21's international stores and website will continue operating, while the brand name and intellectual property remain with Authentic Brands Group.
"We are receiving lots of interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level," said Jarrod Weber, global president of lifestyle at Authentic Brands Group.
Authentic Brands Group CEO Jamie Salter had previously acknowledged at a conference last year that buying Forever 21 was "probably the biggest mistake I've made." Cost-cutting efforts, including requesting up to 50% rent reductions from landlords, generated $50 million in savings but proved insufficient to offset mounting losses.
