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Bankrupt, Forever 21 Will Close 200 Stores and Leaving Asia

This teen clothing retail store eventually became the latest victim in the retail industry which was staggered due to store closures and bankruptcy.

Penulis: Lia Sisvita Dinatri | Editor: Lia Sisvita Dinatri
The atmosphere of the Forever 21 booth at South State Street, Chicago, Illinois, United States, August 8, 2014 - As part of its restructuring and bankruptcy, fashion retailer Forever 21 will close 200 of its stores.

Quoted by CNN, Wednesday (10/30/2019), the bankruptcy of Forever 21 due to the burden of rental fees that are too expensive, an unprofitable market, and eroded by online retailers so that people prefer to shop online.

This teen clothing retail store eventually became the latest victim in the retail industry which was staggered due to store closures and bankruptcy.

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The plan is even, Forever 21 will come out of most international markets, including Canada, Europe, and Asia. Reportedly, the company will focus on smaller store bases in the US, Mexico and Latin America after the restructuring. 

As for now, the company's ability to continue and maintain its business depends largely on the owner and the vendor.

But the main advantage for retailers lies precisely in closing stores with lower costs and going out and renting.

As is known, Forever 21 almost rents out all of its retail stores, including 549 stores in the US and 251 stores in other countries. The annual rental fee alone is 450 million US dollars. 

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Legal counsel handling Forever 21 from Barnes & Thornburg LLP, Jim Van Horn, said the company had significant support from its owners regarding the rental structure, both to be renegotiated to stay or stop. 

Meanwhile, according to Coresight Research, many retail stores were closed in the first half of 2019. The closure of retail stores in the first half was even more than in 2018. 

Forever 21 is part of the closed shop. The closure of the Forever 21 store makes it part of an industry trend facing many retailers.

Moreover, most Forever 21 stores around the world are located in shopping centers, aka malls. The existence of shops in the center of the mall certainly depends on the number of visitors. When the mall traffic is quiet, a decrease in sales will occur.

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In fact, to minimize this, Forever 21 has adjusted the company's strategy by selling online. But the reason for the bankruptcy is the value of rents that entered the last decade is too high, despite the lack of sales. 

Despite restructuring and closing 200 of its stores, many vendors still support retailers. The company has also signed contracts with more than 130 agreements to support vendors.

According to Horn, it really helped the company. Forever 21 can also reject a contract or lease if the offer is below market value.

Landowners can happily end up getting more rent from a financially healthier company. (*) 

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