Forever 21 ($PRIVATE:FOREVER21) was once the hottest place for teens and 20-somethings to get their on-trend clothing. Forever 21 stores seemed to be in every mall. They were the undisputed king of fast fashion. But that was then and this is now. In September 2019, Forever 21 filed for bankruptcy. Let’s take a look at the rise and fall of the once-unstoppable clothing store.
Forever 21 was founded in 1984 in Los Angeles by husband-and-wife team Jin Sook and Do Won “Don” Chang just three years after they emigrated from South Korea to Los Angeles. Don noticed that all the people driving nice cars were in the apparel industry. They opened their first store, a 900 square foot space called Fashion 21 in the Highland Park neighborhood of Los Angeles. During their first year in business, the store brought in $700,000 in sales. As it turned out, Jin Sook, who had been a hairdresser in South Korea, had a knack for spotting trends that were easy to copy. This gave the Changs an early edge in the highly competitive garment industry.
Fashion 21 was filled with inexpensive clothing made by Korean-American manufacturers in Los Angeles. Every item in the store was chosen by Jin Sook. Merchandise was (and still is) turned over quickly. What was new, hot, and trendy was put at the front of the store. Industry analytics estimate than Forever 21 turns over 20% of its stock every week. That's twice the rate of other clothing stores.
After the success of their first store, the Changs changed the name to Forever 21 and began opening new stores every six months. The first mall store opened in Panorama City, California in 1989. In 1995, the first store outside California opened in Miami. The first international store opened in 2001 in Canada. By 2010, Forever 21 was dominant in the fashion industry with 500 stores across the U.S. The Changs were the 79th richest Americans. Forever 21 made a name for itself as a place to get trendy clothes are rock bottom prices.
The company peaked in 2015 with $4.4 billion in sales from more than 600 stores. The Changs had a combined net worth of $5.9 billion. Forever 21 rose to great success by turning over their inventory quickly and keeping their prices low. However, their core demographic of teenagers are flocking to online shopping.
On top of that, Forever 21 and its founders have faced near-constant lawsuits for everything from labor department violations to copyright infringement. Singer Ariana Grande sued the company last year. Forever 21 was selling a t-shirt with her likeness on it. They did not get permission from Grande to do this. This isn't the first time the company has gotten in hot water over copyright infringement.
The retail apocalypse
But copyright infringement isn't the only area of trouble for Forever 21. In August 2013, the company announced it would limit hours of some full-time employees to no more than 29.5 hours a week, slightly below the 30-hour week that qualifies workers as full-time under the Affordable Care Act. It denied the change was related to the health care act and instead tied it to projected store sales. The retailer has also been sued multiple times by workers for sweatshop conditions.
Rising competition from other fast fashion brands like H&M ($STO:HM-B) has caused real problems for Forever 21. In 2018, the company began downsizing and closed stores in Amsterdam, Dublin and the UK as well as a number of North American stores. In the first quarter of 2019, H&M posted a 10% increase in sales. Around that same time, Forever 21 was exploring options for restructuring the company with private-equity firm Apollo Global Management.
We wrote about the potential downfall of the brand several months ago, which you can read right here.
By July 2019, the Changs were no longer billionaires and their combined fortune had slumped to $1.6 billion, or $800 million each. Then, on September 29, 2019, Forever 21 announced that it had filed for bankruptcy protection. The company is closing all of its stores in Canada and Japan, most of its stores in Europe and Asia, and hopes to continue to do business in the U.S., Mexico, and Latin America. Forever 21 will close up to 178 stores in the US and as many as
End of the line
E-commerce makes up 16% of Forever 21’s sales, which dropped to $3.3 billion in 2018. The company expects the restructured company to bring in $2.5 billion in sales. The company employs about 32,800 people, down from 43,000 in 2016. Forever 21 did not pay rent on any of its stores in September 2019 to preserve capital. The company hopes to renegotiate many of its U.S. store leases. Forever 21’s bankruptcy comes due to both declining mall traffic and a waning interest in fast fashion.
Do Won and Jin Sook Chang have made (and lost) billions, clothed millions, and avoided some potentially nasty trials by settling out of court. Now it seems as if their luck has run out. How long can their luck last? It's always been only a matter of time before the way they do business and the way they treat employees, vendors, suppliers, and designers caught up with them. But look at it this way, if you can find a Forever 21 store (they're closing down left and right), you can pick up a knock-off designer sweater that was originally $18.95 on sale.
The last time we wrote about Forever 21 was the final nail in its coffin, which you can check out right here.
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.
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