Fast-fashion retailer Forever 21 is asking landlords for major rent reductions as it faces declining sales and tough competition.
Sources say the company wants to slash rent by up to 50% at its 380+ U.S. stores.
The retailer is dealing with several long-standing issues.
It’s struggling in a crowded fast-fashion market, having trouble managing inventory, and failing to keep up with changing customer tastes.
These problems persist even after its 2019 bankruptcy and buyout by a group including Authentic Brands Group and mall owners Simon Property Group and Brookfield Property Partners.
TRENDING: Report: Country on the Verge of a Corporate Bankruptcy Wave, Could Result in Massive Job Losses
While Forever 21 is trying to renegotiate leases to cut costs, it hasn’t hired financial advisors or considered another bankruptcy filing yet. This suggests the company is looking for other ways to improve its finances.
Forever 21’s situation shows the dangers of expanding too quickly without investing in key areas like supply chain and trend forecasting.
The company once had over 800 stores worldwide, which proved unsustainable and led to its first bankruptcy.
Even after closing hundreds of stores, Forever 21 is still facing major challenges.
Forever 21 seeks rent concessions as fast fashion brand faces financial woes https://t.co/ZHJTXHXHEA
— CNBC International (@CNBCi) June 21, 2024
These struggles are also affecting Sparc Group, which runs Forever 21 and other formerly bankrupt brands like Aeropostale and Brooks Brothers.
Sparc is a joint venture that includes Authentic Brands, Simon Property Group, and recently added Chinese fast-fashion giant Shein.
An industry insider explained Sparc’s difficulties: “Combining multiple old-school brands and trying to centralize everything has been really tough and expensive. They’re dealing with merging different teams, technologies, and supply chains, all while mall-based retail is declining.”
Financial data shows Forever 21 has been consistently late paying its vendors over the past year.
Some bills were more than 70 days overdue in late 2023. While late payments aren’t unusual in retail, such long delays can signal financial troubles.
Ragini Bhalla from business intelligence firm Creditsafe noted, “The average retailer pays bills 12 to 13 days late.
Forever 21’s much longer delays raise questions about their financial health and ability to manage cash.”
As Forever 21 tries to negotiate lower rents, the outcome could be crucial for its future.
The company’s ability to adapt to changing customer preferences, streamline operations, and find a sustainable path in the competitive fast-fashion world remains uncertain.
READ NEXT: New Report Shows Jobs Most Likely to be Automated by Artificial Intelligence
This situation highlights the broader challenges facing traditional retailers as they deal with changing shopping habits, the rise of online shopping, and the need for flexible business models in today’s digital marketplace.
