By Bloomberg

In a strategic move to realign its business model with the evolving retail landscape, Forever 21 has announced plans to close all 354 of its U.S. stores. This decision comes in the wake of the company’s recent Chapter 11 bankruptcy filing, marking its second such filing in nearly six years. The closures are part of an effort to emulate the operational strategies of successful online retailers and adapt to the shifting preferences of modern consumers.

Background: The Rise and Challenges of Forever 21

Founded in 1984 by South Korean immigrants Jin Sook and Don Chang, Forever 21 rapidly expanded from a single store in Los Angeles to a global fast-fashion powerhouse. The brand became synonymous with trendy, affordable apparel, attracting a youthful demographic eager for the latest styles. At its peak, Forever 21 operated over 800 stores worldwide.

However, the retail environment began to change dramatically with the rise of e-commerce and shifting consumer behaviors. Traditional brick-and-mortar retailers faced increasing competition from online platforms that offered convenience, competitive pricing, and a vast array of options. Forever 21 found itself grappling with these challenges, leading to its first bankruptcy filing in 2019. Despite efforts to restructure, including closing underperforming stores and attempting to bolster its online presence, the company continued to struggle financially.

The Decision to Close Physical Stores

In March 2025, Forever 21 filed for Chapter 11 bankruptcy protection in Delaware, citing liabilities between $1 billion and $5 billion. This move underscored the company’s ongoing financial difficulties and the need for a significant strategic overhaul. U.S. Bankruptcy Judge Mary Walrath granted the company temporary permission to commence going-out-of-business sales at all 354 of its U.S. locations.

The decision to shutter physical stores aligns with Forever 21’s objective to transition towards a business model that mirrors the success of online-only retailers. By reducing the overhead associated with maintaining a vast network of physical locations, the company aims to invest more heavily in its digital infrastructure and e-commerce capabilities.

Competition from Online Rivals

Forever 21’s challenges have been exacerbated by fierce competition from online fast-fashion retailers such as Shein and Temu. These companies have leveraged agile supply chains, data-driven fashion forecasting, and aggressive online marketing strategies to capture significant market share. Additionally, they have benefited from the “de minimis” exemption, which allows packages valued under $800 to enter the U.S. duty-free, enabling them to offer lower prices.

The competitive advantage held by these online retailers has highlighted the vulnerabilities in Forever 21’s traditional retail approach, prompting the company to reevaluate its strategy and prioritize digital transformation.

Impact on Employees and Stakeholders

The closure of all U.S. stores has significant implications for Forever 21’s workforce and stakeholders. In early March 2025, the company laid off approximately 700 employees in California and Pennsylvania and announced the closure of its Los Angeles headquarters. These actions reflect the profound organizational changes underway as Forever 21 seeks to navigate its financial challenges and reposition itself in the market.

Response from Mall Owners and the Retail Industry

Interestingly, some mall owners view Forever 21’s store closures as an opportunity. The vacated spaces present a chance to attract new tenants that may offer higher rents and draw more foot traffic. This perspective underscores the dynamic nature of the retail industry, where change can create openings for revitalization and innovation.

Future Outlook

As Forever 21 embarks on this transformative journey, the success of its online-focused strategy remains uncertain. The company must not only enhance its digital platform but also redefine its brand identity to resonate with today’s consumers, who increasingly value sustainability, ethical production, and personalized shopping experiences.

The broader implications for the fast-fashion industry are also noteworthy. Forever 21’s shift highlights the pressing need for traditional retailers to adapt to the digital age and the evolving demands of the market. The company’s experience serves as a cautionary tale and a potential blueprint for others navigating similar challenges.

Conclusion

Forever 21’s decision to close all U.S. stores and pivot towards an online-centric model marks a significant moment in the evolution of retail. It reflects the profound impact of digital transformation on consumer behavior and the necessity for legacy brands to innovate continually. As the company endeavors to reinvent itself in the digital marketplace, its journey will be closely watched by industry observers, competitors, and consumers alike.