Forever 21’s bankruptcy puts a spotlight on the widening chasm between America’s lower-quality malls, which are losing customers and anchor tenants, and its top shopping centers, which continue to draw foot traffic.
In the years before and after the recession, Forever 21 opened stores at a rapid clip — they also served as the company’s main marketing vehicle — and bigger was often better. While teenage and 20-something women were the core customer base, Forever 21 believed that it could sell to the whole family. It moved into spaces vacated by bankrupt chains like Mervyn’s and Gottschalks and opened huge flagships in major cities, including a Times Square colossus in 2010 that was around 90,000 square feet and still spans four floors. (The company said it is in discussions with the landlord of that store about its future.)
The retailer, which did not pay rent on its stores in September in order to preserve capital, believes it can renegotiate many of the leases on its United States stores after the filing, said Jon Goulding, an executive at the consultancy Alvarez & Marsal who will be Forever 21’s chief restructuring officer during the proceedings. He said liquidations might begin Oct. 31 for the stores that are closing and that he anticipated the final count to be below 178.
“A number of these folks don’t want boxes back of the size we have with what’s going on in the mall space,” he said of the chain’s landlords. While the company did not have specific data available, Mr. Goulding said that underperforming stores were likely located in lower-quality malls and those that had lost other bankrupt retailers, like Sears.
Forever 21 continued to add more merchandise as it grew and did not seem to anticipate the rise of digitally-savvy competitors like Asos and Fashion Nova. It introduced F21 Red in 2014 with a plan to sell Forever 21 “basics” like $1.90 camisoles and $7.90 jeans, while Riley Rose, a beauty brand created by Linda Chang and her sister, Esther, opened in 2017. The Riley Rose stores will likely close and become part of existing Forever 21 locations, while F21 Red will continue to operate some stand-alone locations.
Ms. Chang said that the company still saw promise in areas like men’s and girls’ merchandise, but that it planned to pare down other areas like home décor, electronics and cosmetics.