For the second time since its founding in 1984, the fast-fashion movement leader, Forever 21, has filed for bankruptcy and is expected to close its over 350 U.S. locations and cease all operations in the U.S.[1] The primary causes of the company’s demise are attributed to fast-fashion companies Shein and Temu.[2]
Since it was founded, Forever 21 has been viewed as a prominent leader in the fast-fashion movement. A movement wherein high fashion designs and trends are replicated and mass produced at a low cost to bring them to retail quickly while the demand for these trends is high. This model was often criticized for ignoring the intellectual property rights of original designers.[3] By following this model, however, Forever 21 was able to open over 350 stores in the U.S., employ 43,000 people, and generate more than $4 billion in annual sales at its peak.[4]
However, due to various factors including rapid expansion, competition from online retailers, and an inability to adapt to shifting consumer preferences and trends, Forever 21 proceeded to file for bankruptcy in 2019.[5] It was later bought by a consortium including Authentic Brands Group and landlords Simon Property Group and Brookfield Property Partners, receiving new capital and a trimmed down store fleet.[6] After being bought, Forever 21 proceeded to generate $2 billion in revenue and $165 million in EBITDA during fiscal 2021. However, in the following three fiscal years, the company lost more than $400 million, losing $150 million in fiscal 2024 alone, and is projecting a loss of $180 million in EBITDA through 2025 with the Authentic Brands Group CEO Jamie Salter quoted on record stating that purchasing the business was “probably the biggest mistake I’ve made.”[7]
As a result, Forever 21 has filed for bankruptcy protection for the second time, citing the Covid-19 pandemic, the highest inflation in decades, and new competition from Chinese brands such as Shein and Temu as the factors leading to this decision. Specifically, the company has stated that Shein and Temu have “materially and negatively impacted” Forever 21 by using the de minimis exemption to undercut its business. Under the de minimis exemption, goods valued under $800 may be shipped to the U.S. without import duties. This allows Shein, Temu, and other competing non-U.S. online retailers to pass significant savings onto consumers in the form of products that are priced drastically lower than those offered by their American competitors. As a result, retailers such as Forever 21 are undercut, as they must pay duties and tariffs to purchase product for their stores and warehouses in the U.S. The Trump Administration’s recent implementation of stringent tariffs on Chinese imports, including an originally announced 145% tariff on Chinese goods, and the end of the de minimis exemption have had a significant impact on Chinese retailers such as Shein and Temu.[8] In the first three months of 2025, online shipments from China to the United States fell 65% by volume. Both Shein and Temu announced price adjustments starting April 25, 2025 in response to the tariffs, with Shein beginning to source products from Vietnam, where the tariffs are lower. However, Vietnamese manufacturers often take much longer to produce the same output as Chinese manufacturers, which could ultimately lead to the downfall of the ultra-fast fashion model which relies on rapid reproduction to keep up with rapid trend turnover.[9] Even the recent impact of the announced tariffs on Shein and Temu, however, are unlikely to safe Forever 21 from liquidation.
As of now, Forever 21’s operating company owes $1.58 billion in loans and is headed toward outright liquidation in the U.S. However, its international stores and website will continue to operate, with its brand name and other intellectual property owned by Authentic Brands Group. In fact, Forever 21 has recently announced that it will make a fourth attempt to enter the Chinese market.[10] Nevertheless, the firm could still find new operators willing to run the company in the U.S., either now or in the future. So far, the company has been seeking a buyer for several months, making contact with more than 200 bidders, but no viable deal has come together yet.
[1] Gabrielle Fonrouge, Forever 21 expected to close all U.S. stores, blames Shein and Temu for demise, CNBC (Mar. 17, 2025), https://www.cnbc.com/2025/03/17/forever-21-files-for-second-bankruptcy-blames-shein-and-temu.html
[2] Id.
[3] Ana Arjona, Fast Fashion and Intellectual Property: When Is It Considered Copying or Inspiration?, Vogue College of Fashion (Mar. 24, 2025), https://www.voguecollege.com/articles/fast-fashion-and-intellectual-property-when-is-it-considered-copying-or-inspiration/#:~:text=Fast%20Fashion%20and%20Intellectual%20Property%3A%20A%20Growing%20Problem&text=Because%20the%20speed%20at%20which,independent%20designers%20or%20luxury%20brands.
[4] Id. at ¶ 17.
[5] Tricia McKinnon, Forever 21: 4 Reasons it Failed & Filed for Bankruptcy, Indigo9 Digital Inc. (Jan. 28, 2025), https://www.indigo9digital.com/blog/forever21failureandbankruptcy
[6] Fonrouge, at ¶ 13.
[7] Id. at ¶ 15.
[8] Ecommerce North America, Chinese ecommerce exports to US crash 65% as tariffs bite, (May 2, 2025), https://www.ecommercenorthamerica.org/2025/05/02/chinese-ecommerce-exports-us-tariffs-2025/?utm_source=chatgpt.com
[9] Mstimes, Shein and Temu Price Hikes: How Tariffs Are Reshaping US E-Commerce, (Apr. 17, 2025), https://www.msmtimes.com/2025/04/Shein-and-Temu-Price-Hikes-How-Tariffs-Are-Reshaping-US-ECommerce.html?utm_source=chatgpt.com
[10] https://www.reuters.com/business/retail-consumer/forever-21-looks-resurrect-china-north-america-business-with-new-partners-2025-08-29/.
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