Fast fashion retailer Forever 21 has filed for bankruptcy protection for the second time in six years, citing fierce competition from Shein and Temu as key culprits in its demise.
The retailer’s operating company, F21 OpCo, has announced plans to cease all operations in the U.S., launching liquidation sales across its 350-plus stores, while still entertaining bids from potential buyers willing to salvage its remaining inventory.
The company’s struggles come on the heels of a stormy period marked by the COVID-19 pandemic, skyrocketing inflation, and an influx of competition from online retailers. In a court filing, Stephen Coulombe, co-chief restructuring officer of Forever 21, pointed fingers at Shein and Temu for exploiting a trade loophole known as the de minimis exemption. This law allows goods valued under $800 to be imported into the U.S. without incurring import duties, giving these competitors a significant edge in pricing.
“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. “Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the Company, have been undercut.”
Despite the closure of the U.S. stores, the brand itself may not disappear entirely. International stores and e-commerce platforms are expected to continue operations under the management of Authentic Brands Group, which holds the intellectual property rights to Forever 21.