Forever 21 Files For Bankruptcy, Citing Overwhelming Competitive Onslaught From Shein And Temu

The American retail landscape is witnessing a brutal reality: survival is no longer guaranteed, even for once-iconic brands. Forever 21, a staple of the fast-fashion industry, has filed for bankruptcy protection for the second time in six years, citing an overwhelming competitive onslaught from Chinese e-commerce giants Shein and Temu.

The company’s operating arm is now in the final stages of shutting down its U.S. operations, with liquidation sales already underway at its more than 350 remaining locations. Yet, its fate isn’t completely sealed. Court filings suggest that the brand is still open for bids—if any buyer is willing to take on its inventory and sustain its brick-and-mortar presence.

Forever 21’s collapse is more than just another retail failure—it’s a testament to the shifting dynamics of global commerce. While it is the most visible American brand to suffer from Shein and Temu’s rise, even retail behemoths like Amazon are feeling the shockwaves of the Chinese e-tailers’ dominance.

The Competitive Tsunami

Since its first bankruptcy filing in 2019, Forever 21 has fought to regain its footing. But the emergence of ultra-fast-fashion platforms like Shein and Temu proved to be a challenge too great to overcome. The company’s restructuring officer, Stephen Coulombe, pinpointed a key disadvantage in the competition: the “de minimis” exemption—a U.S. trade law that allows goods valued under $800 to enter the country duty-free. Chinese platforms have leveraged this loophole to keep costs down, while Forever 21 and other U.S.-based retailers struggle under the weight of import duties and tariffs.

Coulombe’s court filing was blunt in its assessment: “Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers. Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the Company, have been undercut,” it said.

Calls for regulatory intervention have gone largely unheeded, though President Donald Trump has vowed to end the de minimis exemption to level the playing field for U.S. businesses. But for Forever 21, that change may come too late.

Forever 21 had already been searching for a buyer for months before its latest bankruptcy filing. More than 200 potential bidders were contacted, with 30 signing confidentiality agreements, yet no viable deal materialized. Reports suggest that even liquidators were hesitant about taking on the troubled retailer.

In an attempt to curb losses, Forever 21’s parent company, Sparc Group, formed a new entity called Catalyst Brands and sought an unconventional partnership with Shein in 2023. But the collaboration did little to salvage the business. Despite Shein’s meteoric rise, the fast-fashion giant was unable—or unwilling—to throw Forever 21 a meaningful lifeline.

A Brand’s Legacy in Decline

Founded in 1984, Forever 21 was once synonymous with fast fashion, peaking at $4 billion in annual sales and employing 43,000 people worldwide. However, the brand failed to adapt quickly enough to the digital revolution and the rise of mobile-first retail strategies. By the time it emerged from its first bankruptcy, the retail landscape had shifted dramatically.

Despite an initial rebound, the retailer’s financials continued to deteriorate. In fiscal 2021, it posted $2 billion in revenue and $165 million in EBITDA. But with inflation soaring, supply chain disruptions mounting, and competition intensifying, the company reported losses exceeding $400 million in the past three years alone. In fiscal 2024, its losses amounted to $150 million, with an even steeper decline projected for 2025.

Forever 21’s financial burden is staggering. The company owes $1.58 billion in loans and has outstanding debts exceeding $100 million to apparel manufacturers in China and Korea.

A Future Without Forever 21?

Although its U.S. operations are disintegrating, Forever 21’s brand isn’t entirely vanishing. Its international stores and online platforms are expected to continue operating under the ownership of Authentic Brands Group (ABG), which controls the intellectual property. ABG’s Global President of Lifestyle, Jarrod Weber, remains optimistic about the brand’s future.

“We are receiving lots of interest from strong brand operators and digital experts who share our vision and are ready to take the brand to the next level. Our U.S. licensee’s decision to restructure its operations does not impact Forever 21’s intellectual property or its international business. It presents an opportunity to accelerate the modernization of the brand’s distribution model, setting it up to compete and lead in fast fashion for decades to come,” he said.

However, past missteps cast doubt on such assurances. ABG CEO Jamie Salter himself admitted that acquiring Forever 21 was “probably the biggest mistake” he ever made. His comments underscored the harsh reality that even cost-cutting measures—such as slashing rent by up to 50%—weren’t enough to prevent the company’s freefall.

Forever 21’s downfall is emblematic of a broader shift in the global retail landscape. Shein and Temu’s rapid dominance signals a new era where traditional fast-fashion retailers struggle to compete against data-driven, mobile-first platforms that can deliver trends at a fraction of the cost.

Even Amazon, once considered untouchable, is feeling the ripple effects of these low-cost disruptors. While Amazon continues to dominate in logistics and cloud services, Shein and Temu have captured the younger demographic, offering ultra-affordable fashion at an unprecedented scale.

As Forever 21 fades from the American retail scene, the question remains: which legacy brands will be next? And will U.S. regulators take action before another household name meets the same fate?