The US operator of Forever 21, F21 OpCo, has filed for Chapter 11 bankruptcy and is set to carry out an orderly wind-down of its business.

The company said in a statement it will implement liquidation sales at its stores while simultaneously conducting a sale and marketing process for some or all of its assets. 

It has also entered into a Plan Support Agreement (PSA) with its secured lenders to support a quick and efficient bankruptcy process.

In the event of a successful sale, the company may pivot away from a full wind down to facilitate a going-concern transaction. 

The stores and website in the US will remain open and continue serving customers. Locations outside of the US are operated by other licensees and are not included in the chapter 11 filings.

Brad Sell, CFO of F21 OpCo, said the company had evaluated all options but was unable to find a sustainable path forward. 

He cited competition from foreign fast fashion companies as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends.

Authentic Brands Group continues to own the intellectual property associated with the Forever 21 brand and may license the brand to other operators.

Authentic Brands previously teamed up with owners Simon Property Group and Brookfield Corporation to buy Forever 21 out of bankruptcy in 2020.

Neil Saunders, MD of GlobalData, said Forever 21 was always a retailer “living on borrowed time”.

“Over recent years it has been hit with dual headwinds from a weak apparel market and stiff competition from cheap Chinese marketplaces. Both things have eroded its standing and depleted its market share.”

He said lackluster merchandising and range assortment had not helped the company weather those challenges “and the brand has lacked any clear point of view for a long time”.

“The net result is that more and more customers, especially those at the younger end of the market, have abandoned it,” he said, adding that the retailer was “built for a different era” its stores often too large and often located in weaker malls.

“The hope that Forever 21 lives on comes through the sale of the brand, which would allow it to remain as an online operation and through possible licensing arrangements. This would make Forever 21 a shadow of its former self, but a sale is possible as e-commerce and brand groups may show some interest. The price, however, would need to reflect its now diminished status.”