Forever 21's Second Bankruptcy: A Cautionary Tale of Fast Fashion's Fall

The fast-fashion retailer Forever 21 has once again found itself in the throes of bankruptcy, filing for Chapter 11 for the second time in six years. This time, the company is grappling with dwindling mall traffic and mounting competition from online retailers. The retailer's U.S. operating company announced plans to conduct liquidation sales at its stores while simultaneously conducting a court-supervised sale and marketing process for some or all of its assets. The company's estimated assets range from $100 million to $500 million, with liabilities between $1 billion and $5 billion, and creditors numbering between 10,001 and 25,000. The company's stores and website in the United States will remain open and continue serving customers, and its international stores remain unaffected.

Forever 21's journey from a small Los Angeles store to a global fashion empire and back to bankruptcy is a cautionary tale of a brand struggling to adapt to a rapidly changing retail environment. Founded by Jin Sook and Do Won "Don" Chang in 1981, Forever 21 epitomized the meteoric rise and sudden decline of a brand that failed to keep pace with the shifting landscape of consumer preferences and technological advancements.

The company's first bankruptcy in 2019 was a result of several significant factors, including a shift to e-commerce, overproduction and waste, rapid expansion missteps, mounting debt, changing consumer tastes, and legal issues. The fast-fashion model, which led to overproduction, contributed to financial losses and significant environmental impact. The fashion industry is responsible for 10% of global carbon emissions, and Forever 21’s practices exacerbated this issue. The company's aggressive expansion strategy, which included opening large stores, some exceeding 100,000 square feet, strained resources, especially as foot traffic declined. By 2019, the company operated over 800 stores worldwide, many of which were unprofitable. The company’s debt ballooned to $500 million by 2019, driven by declining in-store sales and the costs of maintaining oversized retail spaces. Consumers increasingly prioritized sustainability and ethical practices, with a 2019 McKinsey report finding that 66% of global consumers were willing to pay more for sustainable brands, a trend Forever 21 failed to capitalize on. Labor disputes and allegations of unethical practices, including underpaying workers and poor working conditions, eroded consumer trust. In 2001, the company faced a lawsuit for violating U.S. labor laws, which damaged its reputation.



The company's inability to stay ahead of the competition and leverage social media effectively also contributed to its downfall. New ultra-fast fashion competitors like ASOS and Boohoo entered the market and did what Forever 21 did but better. Not only are these retailers fast to market with their trendy designs, they are also skilled eCommerce operators. Ultra-fast fashion brands embraced social media and reality TV stars like Cardi B and Kylie Jenner earlier than mainstream brands like Forever 21. Both of these stars were seen modeling Fashion Nova clothing on their own Instagram accounts and Cardi B has also had her own Fashion Nova clothing line. This speaks to the fact that ultra-fast fashion brands have not only been ahead of the curve on emerging clothing trends but also on the power of influencers before they became as widely used as they are today.

The company's second bankruptcy filing in 2025 is a stark reminder of the challenges facing traditional retailers in the age of e-commerce and sustainability. The company's plans to overhaul its global business, closing between 300 and 350 stores, including as many as 178 in the United States, and exiting "most of its international locations in Asia and Europe" are a testament to the extent of its financial struggles. The company will continue to operate in Mexico and Latin America, and decisions about which US stores will close are continuing, "pending the outcome of continued conversations with landlords."



The company's repeated bankruptcies serve as a cautionary tale for retailers in the fast-fashion industry. While the brand's bankruptcy was driven by a combination of rapid expansion, poor e-commerce adaptation, and failure to address sustainability concerns, it also highlights the systemic risks facing traditional retailers in the age of e-commerce and sustainability. The company's inability to stay ahead of the competition and leverage social media effectively also contributed to its downfall, as new ultra-fast fashion competitors like ASOS and Boohoo entered the market and did what Forever 21 did but better.

In conclusion, Forever 21's repeated bankruptcies are a stark reminder of the challenges facing traditional retailers in the age of e-commerce and sustainability. The company's inability to adapt to the shifting landscape of consumer preferences and technological advancements, coupled with its aggressive expansion strategy and failure to address sustainability concerns, ultimately led to its downfall. As the retail industry continues to evolve, it is crucial for companies to prioritize sustainability, adapt to e-commerce trends, and stay ahead of the competition to avoid a similar fate.