Forever 21 Collapses Again: All 354 US Stores to Close by May 2025 as Fast Fashion Giant Succumbs to Shein and Temu

The Fall of a Fast Fashion Icon: Forever 21's Second Bankruptcy in Six Years

In a dramatic turn of events for the retail industry, Forever 21, once a dominant force in the fast fashion world, has filed for bankruptcy protection for the second time in six years. As of today, May 19, 2025, all 354 of the retailer's U.S. stores have been closed, marking the end of an era for a brand that was once synonymous with affordable, trendy clothing for young shoppers.

The company's U.S. operating entity, F21 OpCo, filed for Chapter 11 bankruptcy protection on March 17, 2025, citing insurmountable challenges from foreign fast fashion competitors, rising costs, and changing consumer preferences. The retailer began liquidation sales immediately after the filing, with all stores scheduled to close by May 1, 2025.

This development represents a significant shift in the retail landscape, particularly in the fast fashion sector, where online competitors have fundamentally changed the rules of the game.

The Rise and Fall of a Retail Giant

Forever 21's journey began in 1984 when South Korean immigrants Do Won and Jin Sook Chang opened their first store, then called Fashion 21, in a modest 900-square-foot space in Los Angeles. The name Forever 21 reflected Mr. Chang's belief that 21 is the most enviable age - a sentiment that resonated with young shoppers seeking trendy yet affordable clothing.

At its peak, Forever 21 operated approximately 800 stores globally, with 500 locations in the United States alone, generating annual revenues exceeding $4 billion and employing over 43,000 people. The brand was instrumental in popularizing the fast fashion model in the United States, offering styles reminiscent of high-end designers at incredibly low prices.

However, the company's aggressive expansion strategy coincided with significant shifts in consumer behavior and retail trends. As mall traffic declined and online shopping surged, Forever 21 found itself burdened with oversized retail spaces and mounting operational costs. The retailer filed its first bankruptcy in 2019, closing more than 30% of its U.S. stores before being acquired by Sparc Group, a joint venture between Authentic Brands Group and mall operators Simon Property Group and Brookfield Property Partners.

The Competitive Landscape: Shein and Temu Change the Game

In court filings and public statements, Forever 21 explicitly pointed to Chinese e-commerce giants Shein and Temu as major factors in its demise. These online-only retailers have revolutionized the fast fashion industry with their ultra-low prices, vast product selections, and direct-to-consumer business models.

Brad Sell, Chief Financial Officer of F21 OpCo, stated in the bankruptcy announcement: 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, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin.

The de minimis exemption, a trade provision allowing shipments valued under $800 to enter the United States duty-free, has provided a significant competitive advantage to companies like Shein and Temu. This loophole has enabled these retailers to offer products at substantially lower prices than traditional brick-and-mortar stores like Forever 21, which must pay duties and tariffs on inventory destined for their U.S. stores and warehouses.

Financial Struggles and Failed Turnaround Attempts

Forever 21's financial situation had been deteriorating rapidly in the months leading up to the bankruptcy filing. The company reported losses of $150 million in 2024 alone and was projected to lose approximately $180 million in 2025, according to court documents.

In a last-ditch effort to save the business, Forever 21 had been actively searching for a buyer, reaching out to approximately 200 potential investors. Despite 30 of these prospects signing non-disclosure agreements, no viable deals materialized.

The retailer also attempted to adapt to changing market conditions through a partnership with Shein in 2023, when the Chinese e-commerce giant acquired one-third of Sparc Group, Forever 21's parent company. However, this collaboration yielded only modest results and ultimately failed to reverse the retailer's declining fortunes.

Jamie Salter, CEO of Authentic Brands Group, which owns Forever 21's intellectual property, had previously acknowledged the challenges posed by Shein and Temu, stating last year that acquiring Forever 21 was the biggest mistake I made.

The Impact on Creditors and Suppliers

The bankruptcy has left Forever 21's creditors, particularly suppliers and vendors, facing significant losses. Under the proposed restructuring plan, unsecured creditors are expected to receive only 3% to 6% of their total claims, which amount to approximately $433 million.

Justin Alberto, an attorney representing a committee of creditors that includes manufacturers and suppliers from both the U.S. and China, stated during a virtual bankruptcy hearing that these creditors are getting smoked under the restructuring proposal.

The situation is particularly dire for some of Forever 21's largest vendors, whose survival and the job security of their employees are at stake. Many of these suppliers are based in Asia and are owed significant amounts as part of the retailer's $1.58 billion in debt from various loans and over $100 million owed to numerous clothing manufacturers.

The Future of the Forever 21 Brand

While Forever 21's U.S. operations are winding down, the brand itself may continue to exist in some form. Authentic Brands Group, which retained ownership of Forever 21's intellectual property and international rights during the bankruptcy proceedings, has indicated plans to re-license the brand.

Jarrod Weber, global president for lifestyle at Authentic Brands, stated: Forever 21 is one of the most recognizable names in fast fashion. It is a global brand rooted in the U.S. with a strong future ahead. Retail is changing, and like many brands, Forever 21 is adapting to create the right balance across stores, e-commerce, and wholesale.

Weber also mentioned that the company has received significant interest from brand operators and digital experts who share their vision for the future of Forever 21. Authentic Brands aims to build a direct creation-to-shelf model that will accelerate production cycles and deliver the best products at the best prices.

It's worth noting that Forever 21's international locations, which are managed by different licensees, are not part of the bankruptcy proceedings and will continue to operate as usual.

Lessons for the Retail Industry

Forever 21's second bankruptcy in six years offers several important lessons for the retail industry, particularly for traditional brick-and-mortar retailers competing in the fast fashion space.

First, the company's failure highlights the dangers of overexpansion without a well-thought-out strategy. Forever 21's aggressive growth left it with oversized retail spaces in malls that were experiencing declining foot traffic, creating a significant financial burden.

Second, the retailer's struggles underscore the importance of developing a robust e-commerce presence and adapting to changing consumer preferences. While competitors like Zara and H&M invested heavily in their online platforms and sustainability initiatives, Forever 21 was slow to evolve its business model.

Third, the rise of ultra-fast fashion e-tailers like Shein and Temu demonstrates the increasing importance of supply chain efficiency and pricing strategy in the competitive retail landscape. These online retailers have revolutionized the industry with their ability to quickly produce and deliver trendy items at extremely low prices.

The Broader Implications for American Retail

Forever 21's collapse is part of a larger trend of retail closures in the United States. In 2024 alone, major American retailers announced over 7,300 store shutdowns, a 57% increase compared to 2023.

The fast fashion sector, in particular, is undergoing significant transformation as consumers become more conscious of sustainability issues and as online shopping continues to gain market share. Traditional mall-based retailers face mounting pressure to adapt to these changing dynamics or risk following in Forever 21's footsteps.

The bankruptcy also highlights ongoing debates about trade policies and their impact on American businesses. The de minimis exemption, which Forever 21 cited as giving foreign competitors an unfair advantage, has become a contentious issue. In fact, President Donald Trump recently issued an executive order eliminating this exemption for shipments from China and Hong Kong, effective May 2, 2025 - a change that comes too late for Forever 21.

As the retail landscape continues to evolve, the story of Forever 21 serves as a cautionary tale about the importance of adaptability, strategic planning, and understanding changing consumer preferences in an increasingly digital and globally competitive marketplace.