Fast-fashion retailer Forever 21 has filed for bankruptcy for the second time in six years and will permanently close all its U.S. stores. The company’s U.S. operator, F21 OpCo, LLC, filed for Chapter 11 bankruptcy protection on March 17, 2025, citing mounting competition from online retailers such as Shein and Temu, rising operational costs, and declining mall traffic as key factors contributing to its financial struggles.
Operational Wind-Down and Liquidation Sales
Forever 21 plans to wind down its U.S. operations, with liquidation sales already underway at approximately 350 locations. The company has been seeking potential buyers through a court-supervised sale process; however, if no buyer emerges, it will proceed with an orderly wind-down of operations.
Impact of Online Competition and Trade Policies
The retailer has attributed part of its financial difficulties to the “de minimis exemption” utilized by foreign e-commerce companies like Shein and Temu. This U.S. trade policy allows goods valued under $800 to be imported without tariffs, enabling these competitors to offer lower-priced merchandise and gain market share at the expense of domestic retailers like Forever 21.
Financial Obligations and Future Prospects
At the time of filing, Forever 21 reported owing $1.58 billion to creditors and $100 million to clothing manufacturers. The company had reached out to over 200 potential investors but failed to secure a viable buyer. While U.S. operations are ceasing, international stores and the brand’s online presence will continue under the management of Authentic Brands Group, which maintains interest from potential partners.
This development marks a significant shift in the retail landscape, reflecting the challenges traditional retailers face amid evolving consumer behaviors and the rise of e-commerce competitors.
