Forever 21 Liquidation Wrapping Up Soon

Forever 21 in the U.S. fell victim to a familiar trap in retailing — too many stores, too much square footage.

So did Gap Inc.; Macy’s; Abercrombie & Fitch; Limited Inc.; Sears, Roebuck; Payless Shoes; Benetton, and Barneys New York, at one time or another. Some effectively streamlined to become sturdier businesses, or in the case of Payless, Sears, Benetton and Barneys, disappeared from the U.S. retail scene under the weight of excessive debt and waning sales.

But in the case of Forever 21, it wasn’t just two decades of heady expansion that led to the retailer’s U.S. demise. Consumers fervently shopping fast fashion shifted to purchasing fewer, higher-quality items. Competition from fast-fashion retailers like Shein and Temu, as well as Amazon, Old Navy, Walmart, Zara and H&M, chipped away at the business, in part by emulating some of Forever 21’s practices.

Additionally, Forever 21 never fully seized the online opportunity. While competitors were generating 20 percent or more of their volume through e-commerce, Forever 21 was stuck in the teens. Forever 21 also had little success introducing new categories, as was the case with a beauty format called Riley Rose. Insufficient capital hampered attempts to upgrade stores. Meanwhile, Forever 21’s oversized stores suffered merchandise redundancies. That led to complicated assortment strategies and triggered inventory management challenges. The scale of the business eventually slowed the fast fashion retailer’s “speed to market” ability. At its best, Forever 21 needed one month to design, ship and get fresh merchandise to its selling floors, but Zara could do it in half the time. Department stores typically need 10 months or so.

“All business failures really start with the merchandise. Retailers have to keep the customer focused and interested in what they have,” observed Ivan Friedman, president and chief executive officer of RCS Real Estate Advisors, which helps retailers with their real estate strategies and lease negotiations.

“Customers are very fickle, especially in fast fashion,” said Friedman. “If they come in once or twice and don’t see what they want, they have other choices. Obviously, the Forever 21 merchandise at some point was not right. In its heyday, Forever 21 was very successful. But over the years the sales dropped down to about one third of what they once were.”

“Forever 21 got the model right, becoming true fast fashion, but in the ’90s up until 2021, there was this ‘crazy town expansion’ with square footage per store and (apparel) units per store,” said Craig Johnson, president of Customer Growth Partners research and consulting firm. “It started at 5,000 or 6,000 square feet per store. They ramped it up to 25,000 square feet, even to 40,000 square feet or more,” with some flagship locations. After getting too big, “They found the competitive ground underneath changing rapidly,” Johnson said.

William Susman, managing director of Cascadia Capital, said the case of Forever 21 “once again reinforces the importance of a brand speaking to its customers by offering quality design and fashion relative to the price position. It’s product, product, product.

“The Changs ran a very large and once very successful, profitable business, but in some regards it started to feel like the business lost its merchant focus,” Susman added, citing changes in management and ownership that befell the retailer after its bankruptcy in September 2019. The business was purchased out of that bankruptcy by a consortium including Simon, Authentic Brands Group and Brookfield for $81 million, with Authentic and Simon each acquiring 37.5 percent of the company’s intellectual property and operating businesses, and Brookfield acquiring the remaining 25 percent. The sale had the effect of Simon and Brookfield no longer having to worry about collecting rent from a struggling retailer while keeping a major tenant in their properties in business, at least for a few more years.

In early January 2025, Authentic, Simon, Brookfield and Shein came together to form Catalyst Brands, a new $9 billion organization consisting of six retail chains and more than 1,800 stores under the brands Aéropostale, Brooks Brothers, Eddie Bauer, Lucky Brand, Nautica and JCPenney. Absent from that list was Forever 21.

In March, Forever 21 went bankrupt again, leading to the liquidation of all 350 Forever 21 stores in the U.S., currently in progress. With “Going Out of Business” and “40% to 60% Off Entire Store” signs permeating locations, the liquidation process is expected to be completed by the end of April. But there is only until April 15 to redeem gift cards and get store credit. Typically, liquidations in mall stores run about 90 days; some Forever 21 store liquidations began weeks before the most recent bankruptcy filing.

Forever 21 was founded in Los Angeles by Do Won Chang and his wife Jin Sook, South Korean immigrants who arrived in Los Angeles in 1981 while in their early 20s. They had no savings. He had three jobs, as a janitor, a gas station attendant and a café worker, while she was a hairdresser. The Changs took notice of customers driving fancy cars, and knew some were running garment companies. Mr. Chang felt that along with his wife, he could enter the fashion business, confident in his relationship-building prowess and his wife’s sense of fashion.

Their first store was a mere 900 square feet, but subsequent stores were larger and larger, as Forever 21 aggressively took over certain big boxes other retailers were closing, including some from the former Mervyn’s discount chain in California. A fast fact: Forever 21 was originally called “Fashion 21,” but the Changs changed the name to Forever 21 because they thought 21 was the ideal age.

In 2010, Forever 21 opened on the site of a four-level former Virgin Megastore store in Manhattan’s Times Square. And outside the U.S., Forever established stores on London’s Oxford Street, and in Tokyo’s Shibuya District, among other high profile spots. Between 2005 and 2015, Forever 21 opened more than 200 stores internationally, with more than 70 of them covering over 35,000 square feet. At its peak, Forever 21 generated $4 billion in annual sales, with the U.S. representing well over half the volume.

While size mattered, Forever 21 officials have blamed the retailers’ demise in the U.S. largely on external factors and rising costs. “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, as well as rising costs, economic challenges impacting our core customers and evolving consumer trends,” Brad Sell, chief financial officer of the entity operating the Forever 21 stores in the U.S. and licensee of the Forever 21 brand, said March 17 when the liquidation was announced. The exemption, while recently suspended by the Trump administration, meant that no tariffs would be imposed on shipments under $800, benefiting Temu and Shein shipping their individual orders to consumers through their marketplace formats, while hurting Forever 21 which has been bringing into the U.S. large containers from Asia, subject to tariffs.

RCS is marketing 350 Forever 21 leases. According to Friedman, most of them have only one to three years left before they expire, providing an opportunity for a retailer to operate a store in a former Forever 21 space with a short-term risk, rather than having a five or 10-year obligation.

“We have interest in about 50 or 60 leases, at 25,000 square feet or less and they’re in the more robust shopping centers,” Friedman said. “There are not a lot of retailers that would take over more than 25,000 square feet in a mall.” He said he is marketing only eight stores ranging from 85,000 square feet to 148,000 square feet, and that 332 stores are under 30,000 square feet. “North of 35,000 square feet was not the best use of space,” for Forever 21, Friedman said.

One real estate opportunity is the four-level, 91,000-square-foot Forever 21 flagship in Manhattan’s Times Square, at 1540 Broadway. When it opened in June 2010, the store was decked out with New York City icons — mannequins dressed as street vendors, a real yellow taxi cab parked inside, signs theatrically spelled out in Broadway-style lights, 151 fitting rooms, 32 cash registers and 500 employees. It was ready for big business, unusually keeping the site open for way more hours than other stores in the city, and anticipating generating $100 million in sales. But a real estate source once told WWD that the company was paying $20 million in rent on Times Square but only taking in about $30 million in annual volume.

Now the flagship has been reduced to sharp discounting, offering such deals as skin-tight women’s jeans for $13.80, priced down from $22.99; women’s tops reduced to $11.99 from $19.99; pointelle dresses for $20.99, marked down from $34.99. Online, sharper deals are available, such as faux leather bomber jackets marked down to $16.50 from $54.99, and pajama pants marked down to $5.40 from $17.99. Hilco Consumer Retail, Gordon Brothers and SB360 are managing the liquidation sales.

Another real estate opportunity is the 650,000-square-foot warehouse in Perris, Calif., about 50 miles outside of L.A., that’s on the market.

Friedman declined to disclose what retailers are interested in spaces being vacated by Forever 21, but several expansion-minded brands include Primark, Aritzia, Mango, TJMaxx, Nordstrom Rack, Academy Sports + Recreation, Shake Shack, Birkenstock, Lululemon, Athleta, Zara, American Eagle Outfitters, Equinox, Dave & Buster’s, Punch Bowl Social and Pickleball America.

Monday marked another round of Forever 21 closings. Sadly, “the balance will be gone before the end of April,” Friedman said.

Outside the U.S., Forever 21 operates stores in Canada, China, Australia, Germany and several other countries. Its international expansion is said to have put too much pressure its quick-turn supply chain.

Other sources cited other reasons for Forever 21’s difficulties, including a failure to embrace themes important to consumers, such as sustainability, and legal battles over trademark infringement with Gucci, Adidas and Puma, and labor issues involving complaints over sweatshop conditions.

There was also a big switch when Winnie Park, the daughter of the Forever 21 founders, took over the company’s merchandising operations after the first bankruptcy. “She wanted to be a designer,” one source close to the company told WWD back then. “The mother was a merchant, a buyer. She bought from vendors. Much of the success back then was because Forever 21 benefited from the rise of L.A. manufacturing. Being a Los Angeles-based company, Forever 21 could get goods fast. The company was relatively small and nimble and the stores had fresh goods. But things got complicated when it expanded to other countries.” Stores couldn’t get goods as fast and the fashion didn’t seem as fresh.