Forever 21 Bankruptcy 2025: Store Closures, Liquidation & Fast Fashion Collapse

Introduction

Forever 21, a giant in the fast-fashion industry, has once again filed for Chapter 11 bankruptcy, with reports confirming the filing took place on March 16, 2025. This marks the second bankruptcy filing in six years, underscoring the continued challenges faced by traditional retail in an era of digital transformation. With plans to wind down U.S. operations and liquidate all 354 stores, this development represents a potential end for Forever 21’s physical presence in the United States. However, the brand’s intellectual property may still be valuable, leading to future opportunities.

This long-form analysis delves into the factors leading to Forever 21’s decline, the implications of the bankruptcy, and the broader lessons for the retail industry.

Historical Context and Forever 21’s First Bankruptcy (2019)

The Rise of Forever 21

Founded in 1984 by Do Won Chang and Jin Sook Chang, Forever 21 quickly became one of the most recognizable names in fast fashion. The brand’s ability to deliver affordable, trendy clothing made it a favorite among young shoppers. At its peak, Forever 21 had over 800 stores worldwide, generating billions in revenue.

However, the retail landscape began shifting dramatically in the 2010s, as digital-first retailers like Shein, ASOS, and Fashion Nova gained market share. Forever 21’s reliance on large physical stores, often in struggling malls, put it at a disadvantage as consumer behavior shifted toward online shopping.

The 2019 Bankruptcy Filing

Forever 21’s first Chapter 11 bankruptcy filing came in September 2019 as the company faced declining mall traffic, rising rental costs, and e-commerce competition. The filing led to:

Up to 178 store closures in the U.S.
Exiting operations in 40 countries, including Canada and Japan
Sale of the company to Authentic Brands Group, Simon Property Group, and Brookfield Property Partners

The restructuring allowed the company to continue operations under a joint venture called Sparc Group, but many of the underlying challenges remained unresolved.

Forever 21’s Second Bankruptcy Filing (March 16, 2025)

Filing Details and Key Factors

On March 16, 2025, Forever 21’s U.S. operating company, F21 OpCo, filed for Chapter 11 bankruptcy protection in a Delaware court. The filing was confirmed by multiple reports on March 17, 2025, from sources like Reuters, CNN, and Fox Business. The company announced plans to liquidate assets and shut down all U.S. stores.

Key Reasons Behind the Filing

Forever 21’s financial downfall is attributed to several key factors:

Increased Competition – The rise of Shein, Temu, and other online retailers has drastically changed consumer purchasing habits, with ultra-fast fashion brands undercutting prices.
Mall Traffic Decline – As shopping malls continue to struggle, foot traffic to Forever 21’s large store locations has decreased significantly.
Tariff Loophole Exploited by Competitors – The company cited competition from foreign retailers benefiting from the de minimis exemption, which allows for tariff-free imports under $800, giving Shein and Temu a pricing advantage.
Rising Operational Costs – Higher labor and inventory costs, along with supply chain disruptions, contributed to financial losses.
Failure to Adapt to E-Commerce Trends – Unlike competitors who invested in digital-first strategies, Forever 21 lagged in its online retail presence and direct-to-consumer engagement.

Store Closures and Liquidation Sales

Forever 21 announced that it would conduct closing sales at all 354 U.S. stores while keeping its website operational for a short period to liquidate remaining inventory. Industry analysts predict most locations will close by mid-2025.

Economic and Industry Impact

Retail Trends and the “Retail Apocalypse”

Forever 21’s struggles are part of a broader trend affecting brick-and-mortar retail, often referred to as the “retail apocalypse.”

Coresight Research projected that 15,000 retail stores in the U.S. would close in 2025, primarily due to competition from online platforms.
The rise of TikTok-driven fashion trends has made fast fashion even faster, leaving traditional retailers struggling to keep up.
Shopping malls, once the backbone of American retail, have seen a sharp decline in traffic, further exacerbating Forever 21’s woes.

Comparison: Forever 21’s 2019 vs. 2025 Bankruptcy

Aspect	2019 Filing	2025 Filing
Date	September 29, 2019	March 16, 2025
Stores Affected	178 U.S. stores closed, 350 globally	All 354 U.S. stores expected to close
Financing Secured	$275M from existing lenders, $75M new capital	Not specified in reports
International Impact	Ceased operations in 40 countries	Focus on U.S. liquidation
Outcome	Sold to new owners, continued operations	Seeking buyer, likely liquidation

This comparison highlights that while the 2019 bankruptcy was an attempt at restructuring, the 2025 filing indicates a more severe financial collapse.

What’s Next for Forever 21?

Potential Brand Resurgence

While Forever 21’s U.S. stores are expected to close, its brand may continue to exist in some capacity:

Authentic Brands Group (ABG) owns the Forever 21 intellectual property, meaning the brand could be licensed to third-party retailers.
There is a possibility of a digital-only relaunch, similar to brands like Delia’s and The Limited, which now operate exclusively online.
Overseas markets may still have some Forever 21 presence, depending on ABG’s strategy.

Lessons for the Retail Industry

Forever 21’s decline offers valuable insights for other retailers:

Embrace Digital-First Strategies – Retailers must prioritize online growth and direct-to-consumer engagement.
Focus on Sustainability – The rise of eco-conscious consumers demands a shift away from fast fashion’s wasteful practices.
Diversify Revenue Streams – Retailers overly dependent on mall traffic are at risk; omnichannel approaches are crucial.
Adapt Quickly to Market Changes – Competitors like Shein have leveraged rapid supply chain adaptation to dominate fast fashion.

Conclusion

Forever 21’s March 16, 2025, bankruptcy filing marks a turning point in U.S. retail, potentially ending the company’s physical store operations. The filing highlights the challenges facing legacy retailers in an era dominated by digital-first brands. While Forever 21’s intellectual property may continue under new ownership, its failure to adapt to e-commerce trends, rising competition, and shifting consumer behavior ultimately led to its downfall.

This case study serves as a warning for traditional retailers, emphasizing the need for innovation, agility, and a strong digital presence to survive in today’s fast-changing retail landscape.

Citations & Sources

Reuters: Forever 21 files for bankruptcy again, to start liquidation sales
CNN: Forever 21 bankruptcy: All U.S. stores are going out of business
Bloomberg: Forever 21 Operator Files for Bankruptcy Again After Years of Poor Performance
Coresight Research: Retail closures in 2025 expected to reach 15,000 stores