F21 OpCo, the U.S.-based operator of Forever 21, has filed for bankruptcy, marking the clothing brand’s second financial collapse. Once a go-to destination for trendy and affordable fashion among young American shoppers, Forever 21 now faces an uncertain future. But what caused its latest downfall, and could this be the end of the once-beloved brand in America? Keep reading to explore the key factors behind Forever 21’s financial struggles and what lies ahead for the brand.
What led to Forever 21’s second bankruptcy?
F21 OpCo filed for bankruptcy on Sunday, March 16th. The company said it would wind down its domestic operations, hurt by mounting online competition in the fast-fashion sector and weak mall traffic. It blamed the situation on higher costs and companies taking advantage of duty-free treatment of low-cost packages from China to undermine its pricing power.
F21 OpCo filed for bankruptcy on Sunday, March 16th, announcing plans to wind down its U.S. operations amid increasing competition in the fast-fashion industry and declining mall traffic. The company attributed its struggles to rising costs and the impact of duty-free treatment on low-cost imports from China, which it claims have eroded its pricing power.
“We’ve 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,” said Brad Sell, finance chief of F21 OpCo, which operates Forever 21’s 354 U.S. stores.
The de minimis rule allows for the waiver of U.S. tariffs and customs procedures on imported goods valued under $800. This policy has benefited Chinese online retailers like Shein and Temu, enabling them to offer ultra-low prices.
In February, U.S. President Donald Trump postponed his administration’s planned repeal of the clause after its sudden removal caused disruptions for customs officials, postal and delivery services, and online retailers.
Forever 21 entered bankruptcy with $1.58 billion in debt after accumulating more than $400 million in losses over the past three years. In 2024 alone, the company lost $150 million, with court filings in Wilmington, Delaware, projecting an estimated $180 million loss for 2025.
What’s next for Forever 21 in the U.S.?
F21 OpCo is currently holding store-closing sales across all its U.S. locations and will continue to honor customer gift cards for the first 30 days of its bankruptcy proceedings.
Despite the bankruptcy, the company remains in discussions with potential buyers interested in acquiring some or all of its U.S. operations. Meanwhile, its international stores remain unaffected.
The Forever 21 trademark and intellectual property are owned by Authentic Brands Group, an apparel chain operator that licenses them to F21 OpCo. According to Bloomberg, Authentic Brands’ ownership of the Forever 21 brand will not be impacted by the bankruptcy. Regardless of whether F21 OpCo is sold or liquidated, Authentic Brands plans to continue licensing Forever 21 to other retailers and distributors.
F21 OpCo is a subsidiary of Catalyst Brands, the parent company of JCPenney and Lucky Brand. Catalyst Brands oversees SPARC Group’s portfolio, which includes Aéropostale, Eddie Bauer, Lucky Brand, and Nautica. Its shareholders include Simon Property Group, Brookfield Corporation, Authentic Brands Group, and Shein.
A look back at Forever 21’s first bankruptcy
Founded in 1984 in Los Angeles by South Korean immigrants Do Won Chang and Jin Sook Chang, Forever 21 grew into a fast-fashion powerhouse. At its peak, the retailer employed 43,000 people, operated 800 stores worldwide, and generated over $4 billion in annual sales, according to court documents.
By the time Forever 21 filed for its first bankruptcy in 2019, it had 549 stores across the U.S. and 251 international locations. As part of its restructuring efforts, the company announced the closure of 350 stores globally, including 178 in the U.S.
Several factors contributed to the brand’s financial downfall. Like many traditional brick-and-mortar retailers, Forever 21 struggled to adapt as online shopping surged. Its core millennial customer base increasingly turned to digital-first brands like ASOS and e-commerce giants like Amazon, leaving the retailer struggling to compete.
Overexpansion also played a critical role. Despite declining foot traffic, Forever 21 continued opening large-format stores, resulting in high overhead costs that became unsustainable.
Additionally, shifting consumer preferences further weakened the brand’s appeal. The “cheap chic” fashion trend Forever 21 once dominated lost traction as younger shoppers gravitated toward higher-quality yet affordable alternatives.
Ultimately, a combination of e-commerce disruption, aggressive expansion, and changing fashion trends led to Forever 21’s first bankruptcy.