Struggling fashion retailer Forever 21 filed for Chapter 11 bankruptcy Sunday night, toppled by declining mall shoppers, expensive leases and rapid expansion.
The retailer said in a statement Sunday that it would close most of its international locations in Asia and Europe, and continue to operate in Mexico and Latin America.
They will close up to 178 stores in the U.S. and up to 350 overall, The New York Times reported, citing Forever 21′s chief restructuring advisor Jon Goulding from consultancy Alvarez and Marsal. Goulding said liquidations for the stores that are closing might begin on October 31.
“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, the company’s executive vice president, said in a statement.
Chang, whose parents Do Won and Jin Sook Chang founded the company in the 1980s after immigrating to the U.S. from South Korea, said in an interview with New York Times that their rapid and aggressive expansion, combined with the changing retail landscape, was to blame.
“We went from seven countries to 47 countries within a less-than-six-year time frame and with that came a lot of complexity,” Chang said. “The retail industry is obviously changing — there has been a softening of mall traffic and sales are shifting more to online.”
Last week, Bloomberg reported the business had reached an impasse in talks with landlords about the restructure deal. The bankruptcy could leave mall owners with millions of square feet of vacant space ― including the famous Times Square giant which houses 90,000 square feet of fashion over four floors.
Forever 21 is still in discussions about the future of that store with the landlord, The New York Times reported.
The Chapter 11 bankruptcy filing will grant the company protection from creditors, which Forever 21 says will facilitate a global restructuring that will allow the company to focus on a “profitable core part of its operations.”
With $275 million in financing from existing lenders, the business said it intended to continue operations in remaining stores in a “business as usual” manner, and would still honor all company policies, gift cards, returns and exchanges.
Forever 21 said it expected to provide additional details with respect to the Chapter 11 filing as soon as they became available.