Forever 21 Files for Bankruptcy Again, Blaming Shein and Temu as It Plans to Close U.S. Stores

Forever 21 has filed for bankruptcy protection for the second time as it struggles with declining mall traffic and fierce competition from online fast fashion giants like Shein, Temu, and Amazon.

F21 OpCo, which operates Forever 21 stores, announced Sunday that it will wind down its U.S. business under Chapter 11 bankruptcy protection.

This bankruptcy filing comes after a series of challenges, including the pandemic, inflation, and rising competition from online retailers. According to court filings, Sparc Group’s co-chief restructuring officer, Stephen Coulombe, blamed the company’s downfall in part on Shein and Temu’s use of the de minimis tax exemption. The rule allows shipments under $800 to enter the U.S. without paying import duties — an advantage that foreign companies have used to undercut U.S. retailers like Forever 21.

“Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers,” Coulombe wrote.

“While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies,” said CFO Brad Sell. He pointed to the de minimis tax exemption, which allows shipments valued under $800 to enter the U.S. tax-free, as a factor that made it difficult for Forever 21 to compete on price.

Liquidation sales will begin soon at Forever 21’s U.S. locations, while its website will continue to operate during the wind-down process. The retailer’s international stores, run by separate licensees, are not affected and will remain open.

Authentic Brands Group, which owns Forever 21’s international intellectual property, may license the brand to other operators moving forward.

This marks the brand’s second bankruptcy filing, following its first in 2019. Forever 21 was acquired that year by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners.

Founded in 1984, Forever 21 gained popularity in the 1990s and during the Great Recession for offering trendy, affordable fashion. However, the company’s aggressive expansion coincided with the rise of online shopping, leaving it burdened with oversized stores in struggling malls.