By, Sophia Krnjeta
This month, Canadians will be bidding farewell to yet another brick and mortar retailer. After filing for Chapter 11 bankruptcy last September, Forever 21 has announced that it would be closing up the majority of its stores internationally, including all locations in Canada.
In the meantime, shoppers can take advantage of the liquidation sales happening across all Canadian locations until the projected closing on November 30, 2019.
The American retailer itself is in an optimistic position as Chapter 11 bankruptcy allows them to restructure, including ending leases early and renegotiating payment terms with creditors. With the majority of its locations being leases, closing down stores will work to reduce its current occupancy cost of $450.0 million.
After initially planning to close a total of 350 stores, 178 of which would be American, the family-owned company has recently announced that only 88 U.S. locations will be closing. This came as a result of their renegotiated leases, saving the retailer $100.0 million in rent.
Another optimistic point for the company is that 295 of its vendors have entered into vendor support agreements, which will strengthen their chances of successfully continuing operations and emerging from debt.
The circumstances leading to the bankruptcy are plentiful, beginning with the drop of foot traffic in malls. Brick and mortar fashion retailers are closing down at rapid speeds, and over the past year alone names such as Aeropostale, Payless Shoes, and Gymboree have disappeared from malls across Canada.6
Forever 21 experienced a rapid expansion of locations throughout the 2000s, growing from stores in only 7 countries to 47 within 6 years. This expansion took place just as consumer habits began to shift towards online shopping. Today more consumers are shopping online than ever before, making up 16.0% of all retail sales. An estimate by UBS reports this number will grow to 26.0% by 2026, further diminishing the relevance of physical stores.
Despite how consumers are shopping, Forever 21 has seen a drop in both online and in-store sales, with revenues decreasing from $4.4 billion in 2016 to $3.3 billion in 2018. This suggests contributory factors beyond the prevalence of e-commerce, such as changing consumer values.
Forever 21 is notorious for its fast fashion approach to retail, which involves taking the latest looks from high fashion runways and selling them at affordable prices. Values of consumers are reflected in their spending habits, and the fast fashion industry is whirlpool of ethical dilemmas.
Fast fashion items are not designed to last anywhere close to forever, leading them to inevitably pile up in landfills. The fashion industry as a whole is a leader in global carbon emissions and wastewater production. Along with environmental concerns, the industry has also faced backlash in wake of unsafe work conditions involved with overseas production. As a result of these factors, many young consumers are slowing down on this fast fashion trend, opting for more sustainable options.
Despite the concerns surrounding their business model, Forever 21 has reason to continue their operations as a leaner business with fewer locations and less merchandise. The retailer is assured that fast fashion remains relevant and that restructuring the business will provide for a more profitable and successful future.
Featured image by Hannah Morgan.