Forever 21 has taken advantage of the Bankruptcy Law to undertake a global restructuring that will mean the closure of stores in that country and an “exit” from the business in Asia and Europe, although “it will continue operations in Mexico and Latin America,” as reported in a note.
Forever 21 voluntarily joined this process in a Delaware bankruptcy court on Sunday and its Canadian subsidiary also did the same “to facilitate a global restructuring that allows the company to focus on the profitable part of its operations”.
“As part of its restructuring strategy, the company plans to exit most of its international locations in Asia and Europe, but will continue its operations in Mexico and Latin America,” the statement said.
The executive vice president of Forever 21, Linda Chang, considered that this is a measure “necessary to ensure the future” of the business, which has obtained funding of $275 million dollars from its creditor, JPMorgan Chase, and 75 million “new capital” of TPG Sixth Street Partners.
In a separate note addressed to the United States, the firm said that “this does NOT mean that we close the business,” that their stores “are open and will continue to look like a normal day,” with no changes in their exchange policies and returns, gift cards or purchases and refunds.
However, Forever 21 acknowledged that as part of the U.S. bankruptcy process it has “requested approval to close a (undetermined) number of stores” and is still deciding which ones will be chosen.
According to The New York Times, which collects statements from Chang and the consulting firm in charge of the restructuring, Forever 21 will close 178 stores in the country and about 350 in total worldwide, where it is present in 40 countries.
“The retail sector is evidently changing, there has been a moderation of traffic in the shopping centers and sales are becoming more ‘online,” said Chang, a problem shared by other U.S. retailers such as Sears or Penney’s.