Forever 21 Seeks 50% Rent Cuts Following Financial Challenges Due to Sales Decline

By Thea Felicity

Jun 21, 2024 02:56 PM EDT

Low-Cost Apparel Retailer Forever 21 To File For Bankruptcy According To Reports
NEW YORK, NY - SEPTEMBER 12: A Forever 21 store stands in Herald Square in Manhattan on September 12, 2019 in New York City. The Wall Street Journal reported that the retail chain is planning to file for bankruptcy as soon as Sunday. The company is refuting these reports and said they plan to continue operating a vast majority of their U.S. stores.
(Photo : Drew Angerer/Getty Images)

CNBC has learned that Forever 21 is negotiating with landlords for massive rent reductions, with requests reaching up to 50%. This move comes as the retailer contends declining sales and stiff competition from more agile digital rivals. 

If Forever 21 is unable to secure rent concessions from landlords, the company's financial strain could worsen, potentially leading to further cash flow problems and operational challenges. 

This situation might force Forever 21 to allocate more resources towards rent payments, thereby limiting funds available for critical business initiatives like inventory management, marketing, and online expansion. 

Sources familiar with the matter indicated that while rent reduction is not certain, Forever 21 is not currently considering a second bankruptcy filing but is actively seeking to restructure leases as part of cost-cutting efforts.

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Forever 21 Bankruptcy

The retailer, which operates over 380 stores across the United States, has faced persistent difficulties since its 2019 bankruptcy protection filing and subsequent acquisition by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. 

Expansion during its growth phase left Forever 21 with a sprawling store network, which prevented it from adapting swiftly to market changes and managing inventory effectively.

However, NPR clarified that Forever 21 had already been bought out of bankruptcy in 2020.

Despite facing financial challenges and intense competition from digital-first brands like Shein and Temu, Forever 21's operator, Sparc Group, has partnered with Shein. This partnership includes collaborations on co-branded products and pop-up stores to boost foot traffic and revitalize the brand's appeal.

However, uncertainties remain regarding Forever 21's ability to effectively manage its lease obligations and maintain competitiveness in the fast-fashion market.

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