#Forever21 #FastFashion #RetailCrisis
Forever 21 Seeks Rent Concessions Amid Financial Struggles
As Forever 21 faces financial difficulties, the fast-fashion retailer is asking some landlords for rent concessions as high as 50%. This move comes as the company struggles to manage its extensive store footprint and compete with more agile digital competitors.
Forever 21, which filed for bankruptcy protection in 2019, is not currently considering a second filing. Instead, it is working to restructure its leases to cut costs. The retailer operates over 380 stores in the U.S. and faces significant challenges in the increasingly saturated fast-fashion market.
One major issue is Forever 21's inability to manage inventory and respond effectively to consumer trends. The company's financial position has also negatively impacted the performance of its operator, Sparc Group, a joint venture that includes Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. Sparc runs Forever 21's operations, as well as several other formerly bankrupt retailers.
Sparc has been scrutinizing its budgets and dealing with its own financial struggles, largely due to the difficulty of merging numerous legacy brands and centralizing their teams, technology, marketing, e-commerce, sourcing, and supply chains. The joint venture also faces the challenge of running brands that primarily operate in malls, which often have expensive leases for underperforming stores.
Forever 21 has consistently paid its vendors late over the last year, with some bills going more than 70 days past due. This late payment pattern can signal larger financial troubles. The industry average for payment delays is around 12-13 days past due.
The retailer's main competitors have shifted from H&M and Zara to ultra-fast-fashion retailers like Shein and Temu. These new competitors have significantly faster supply chains and are able to respond quickly to trends, making it difficult for Forever 21 to keep up.
In an effort to stay competitive, Forever 21 has partnered with Shein, which will design, manufacture, and distribute a line of co-branded apparel and accessories. This partnership has driven positive foot traffic to Forever 21's stores. However, some industry observers question whether Shein could eventually take over Forever 21's stores, given the success of Shein's pop-up shops.
Original Article: https://www.cnbc.com/2024/06/21/forever-21-seeks-rent-concessions-facing-financial-struggles.html
Leave a Reply