Forever 21 Gets Rent Reduction From Owners, Keeping More Than 60 Stores In The United States?

Recently, a person familiar with the matter said that the US fast fashion giant Forever 21 had obtained the rent reduction from the largest number of owners, so that it could keep more than 60 stores in the United States. As part of the bankruptcy reorganization plan, Forever 21 originally planned to close all these stores.

In September, "ornate ambition" reported that Forever 21 filed for bankruptcy protection formally, when the company failed to negotiate with the owner of the commercial property tycoon Simon Property Group Inc. and commercial real estate company Brookfield Property Partners LP. Therefore, when filing bankruptcy protection applications to the court, Forever 21 did not have any ready-made restructuring plan, and said it would close at least 178 American stores and dozens of overseas stores to achieve better business.

According to a person familiar with anonymity, Forever 21 now plans to close 111 U.S. stores, but it has not yet been finalized, and the number of outlets may change.

Official representatives of Forever 21 declined to comment on the above news.

"Forever 21 is the top ten tenants of most retail real estate projects we have studied, so the owners are willing to remain flexible in reducing rent," said Jim Sullivan, a research analyst at BTIG, a financial services firm.

It is reported that one of the landowners who provide rent relief is the regional shopping center operator Macerich Co., which has 28 Forever 21 stores. The operator, Tom O 'Hern, said in a previous earnings call conference that the company recently negotiated with Forever 21 about closing stores later this year or early 2020, and mentioned that "the company will also reduce the rent of many other stores".

Forever 21 now operates 815 stores in 57 countries and regions, including 600 in the US. If the brand declares bankruptcy, a big closet will inevitably have a great impact on the income of its owners.

Forever 21 was founded by Zhang Dongwen, a Korean American couple (Do Won Chang) and Zhang Jinshu (Jin Sook Chang) in 1984, and is headquartered in Losangeles, formerly known as Fashion 21. It was originally a clothing store with an area of only 84 square meters. After its fashionable style and new speed, it was attracted by young consumers and developed into the fifth largest clothing retailer in the United States. Its tracks spread all over Asia, Europe and the Americas, and the business scope also expanded from women's clothing to men's wear, ornaments, shoes and large size clothing. The company is still privately owned by the founder family. Its annual sales in 2014 were $3 billion 800 million, and sales in 2017 were estimated to be $3 billion 400 million according to Forbes.

But like many other retailers in the plight, Forever 21 is also hard to avoid the impact of the rise of electricity providers in recent years. Sales are declining, and the huge international retail network has become a serious burden on the company.

In April of this year, Forever 21 announced the closure of China's online business platform while announcing the closure of all its physical stores and completely withdrawing from the Chinese market.

Then in June, Forever 21 had hired a restructuring consultant, weighing the news of the restructuring plan.

In the court documents filed in September, Forever 21 blamed the catastrophic international expansion on the main causes of its failure, saying it had lost $10 million a month in the Canadian, European and Asian markets.

Court documents also show that Forever 21's current assets and liabilities are between $10~100 billion. The company's new funds include $275 million from existing lending institutions and $75 million raised from TPG Sixth Street Partners and its associated fund.

Because of the poor overall environment of the retail industry, many retailers in the United States have gone bankrupt. Data released by Coresight Research recently revealed that as of September, 8567 retail outlets in the US have been closed this year.