After much speculation, Forever 21 filed for Chapter 11 bankruptcy late Sunday in the United States Bankruptcy Court for the District of Delaware.
The retailer, which has seen challenges add up for months amid shrinking sales and declining foot traffic, said its Canadian subsidiary filed under a similar arrangement.
The company intends to restructure and focus on the profitable core part of its operations.
According to the filings, it will close up to 178 stores in the U.S. (The company added that it’s still evaluating its U.S. store roster and engaging in ongoing discussions with landlords.) Forever 21 plans to to exit most of its locations in Asia and Europe but will continue operations in Mexico and Latin America.
“This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, EVP of Forever 21 Inc., said in a statement.
According to the release, Forever 21 has obtained $275 million in financing from its existing lenders with JPMorgan Chase Bank N.A. as agent, as well as $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.
“The financing will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees. With support from our key landlord and vendor constituents, we are confident we will emerge as a stronger, more competitive enterprise,” Chang added in the statement.
Retailers across the board have been hard hit by bankruptcy during the past three years. Hefty debt loads, digital transformation and companies’ staid strategies have contributed to the challenges.
Luxury retailer Barneys New York is scrambling to find a buyer in bankruptcy, and last week, reports suggested that five acquirers have expressed interest.
Payless found itself back in Chapter 11 this past February when it filed for bankruptcy a second time and confirmed it would close all U.S. stores as well as shutter its e-commerce business.
Sports Authority, City Sports, Gymboree, Charming Charlie and Bon-Ton Stores are among the other companies that have been taken out of business by bankruptcy.