The retailer, which has more than 380 stores in the U.S., has asked some landlords to cut its rent by as much as 50%.
Forever 21, a well-known fast-fashion retailer with over 380 stores in the U.S., is seeking significant rent reductions from landlords as part of efforts to address its financial struggles. The company has asked for rent cuts of up to 50%, as it grapples with declining sales and heightened competition in the fast-fashion industry, sources familiar with the matter told CNBC.
Despite these challenges, Forever 21 has not hired advisors nor is it considering another bankruptcy filing. Instead, the company is working on restructuring its leases to reduce operating costs, allowing it to stay afloat. The retailer is dealing with several long-standing issues, including an oversaturated market, difficulties in inventory management, and an inability to effectively respond to changing consumer demands.
The retailer’s current situation follows its previous bankruptcy filing in 2019, after which it was acquired by a consortium that included brand management firm Authentic Brands Group and property groups Simon Property Group and Brookfield Property Partners. At the time of its bankruptcy, Forever 21 operated more than 800 locations worldwide.
Similar to other retailers in the fast-fashion sector, Forever 21 expanded too rapidly during its growth years, which ultimately hindered its ability to adapt to shifts in consumer behavior and invest adequately in its supply chain. Although it closed hundreds of stores as part of its bankruptcy proceedings, these measures have not fully resolved the company’s underlying issues.
Forever 21’s ongoing struggles are compounded by the underperformance of its operator, Sparc Group, a joint venture involving Authentic, Simon, and the fast-fashion giant Shein, which joined the venture last summer. Sparc, which also manages brands like Aeropostale, Brooks Brothers, and Lucky Brand, has declined to comment on the situation, while Simon Property Group has not responded to requests for comment.
As it continues to navigate these financial challenges, Forever 21’s efforts to renegotiate leases and streamline its operations will be crucial in determining its future in the competitive retail landscape.