The Reset Button Pushed By Forever 21
Case Code: BSTR600
Case Length: 19 Pages
Pub Date: 2020
Teaching Note: Available
Organization: Forever 21
Countries: United States
Themes: Bankruptcy & Turnaround Management, E-Business Strategy, Restructuring
Abstract Case Intro 1 Case Intro 2 Excerpts
Forever 21 opened its first 900 square foot store on April 21, 1984 at Figueroa Street, LA. In 1989, the company opened its first mall store in Panorama City, California (Refer to Exhibit I for the timeline of Forever 21). At that time, store sizes were beginning to average 5,000 square feet. In 1995, the first store outside of California was opened at Mall of the Americas, Miami, Florida. 24,000 square feet flagship stores were opened in Texas, Miami, LA, Chicago, and Canada in 2001...
The Retail Apocalypse
The retail industry in the US was affected drastically during The Great Recession. The Great Recession was a period of economic decline observed in world markets during the late 2000s and early 2010s . The scale and timing of the recession varied from country to country. The International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression and it was regarded as the second-worst downturn of all time...
Forever 21 Lands in Trouble
In the years after 2010, many retailers wanted to shrink their mall presence whereas Forever 21 cracked leases for big spaces vacated by struggling department stores like the bankrupt Sears, Mervyn’s, and Borders. Its store count bloated from 480 stores in 2010 to 600 stores in 2014 to 800 stores in 2018. Gabriella Santaniello, founder of A Line Partners, a retail research firm, said that Forever 21 ...
No More Fast-Fashion
Forever 21 directed all its focus on expansion and ignored its supply chain. Because of neglecting the supply chain, it took Forever 21 more time to get fresh styles of clothes to market. At the same time fast fashion was picking up and shoppers were asking for freshness in stocks. Sales of Forever 21 tumbled as the company faced increased competition from rivals such as H&M and Zara , which had agile supply chains, and unveiled new styles and fashion more often...
Not Enough Online Presence
Since its inception, Forever 21 had targeted young shoppers. But it lost its target customers after failing to strengthen its e-commerce strategy. Linda Chang, Executive Vice President, Forever 21, said, "The retail industry is changing – there has been a softening of mall traffic and sales are shifting more to online." ....
In 2018, Forever 21 started to downsize and close some European stores in Amsterdam, Dublin, and the UK. In the UK, the company had seen the potential to open 100 stores. But by 2019, it was operating in only 3 stores, down from 8 stores earlier. According to the filings submitted to Companies House In 2017, the company reported a loss of £61 million in the UK...
On September 29, 2019, Forever 21 filed for bankruptcy protection under Chapter 11 to restructure its business. The company said, "We do however expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the US." The company had 549 US stores and 251stores ...
Exhibit I: Timeline of Forever 21
Exhibit II: Who is Affected by the Retail Apocalypse
Exhibit III: Role of Private Equity in Retail Apocalypse
Exhibit IV: E-Commerce Triggered the Retail Apocalypse
Exhibit V: Sustainability over Fashion
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