Why Forever 21 filed bankruptcy ?

Forever 21 filed for bankruptcy by using Chapter 11 US Bankruptcy Code. This means that company will continue to operate while paying back outstanding to creditors. Also nonprofits shops & units to be closed. Company recently raised money from JP Morgan Chase $275 million and from TPG Sixth Street Avenue $75 million. Money raised in order to transform business model as per customers’ preferences.

Forever 21 has been in business for 35 years and used franchise model to grow the business. Only in a few countries formed joint venture with local partners. Number of stores more than 800 stores worldwide.

Forever 21 used to be popular and profitable but something changed. E-commerce giants proved reliability for online shopping. Customers reduced number of visits to shopping malls. Forever 21 didn’t adapt to changes on time. It resulted in huge losses and filed bankruptcy. Also quality of clothing must be better.

Amazon, H&M, Zara created stiff competition to Forever 21 by encouraging customers to shop online (discounts, small gifts, easy return, free shipping, etc).

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