Forever 21 talking to liquidators, mulling second bankruptcy

Beleaguered retailer Forever 21 is in talks with liquidators about future steps for the fast fashion company, according to people familiar with the matter — a sign that it’s struggling to find a buyer as it mulls a second bankruptcy filing.

The company has been looking for a buyer for its U.S. leases and assets to stave off extinction, the people said, and in early January announced it was exploring strategic options. However, opening up the discussion to include liquidators gives Forever 21 the option to use those proceeds to pay back creditors if it can’t find a buyer.

Forever 21’s struggles are primarily in its U.S. business, said one of the people. Its intellectual property, such as its brand name, is not up for sale, the person added. Brand management firm Authentic Brands Group currently owns Forever 21’s IP, and a separate entity operates the company.

It could be difficult for Forever 21 to find a buyer that could successfully turn around the brand in its current form as it contends with heightened competition from Chinese e-tailers Shein and Temu; higher tariffs; and the loss of its cool factor, said the people, some of whom saw the company’s books. The people spoke to CNBC on the condition of anonymity due to the sensitive nature of the discussions.

Forever 21 has also long struggled with profitability and has faced difficulties with managing inventory and reining in costs, some of the people said.

It’s unclear if Forever 21 has hired a liquidator yet, and, even if it does, whether it will ultimately move in that direction. The retailer could still find a buyer, for some or all of its assets, or make a deal with creditors to avoid liquidation. Further, while Forever 21’s stores and assets could liquidate, Authentic Brands Group could eventually bring it back in a different form.

Forever 21 declined to comment. BRG, the advisory firm it’s reportedly working with for restructuring assistance, didn’t return a request for comment.

The discussions come months after CNBC reported that Forever 21 was having financial difficulties and asking landlords to cut its rent by as much as 50% in some locations as it looked to rein in costs. 

It wasn’t yet considering a second bankruptcy filing at the time, but its position has worsened in the months since. Its partnership with its rival-turned-partner Shein has also been a mixed bag, with the CEO Authentic Brands Group Jamie Salter calling it a work in progress last year during a presentation. 

As Forever 21’s efforts to cut costs and boost sales have faltered, the company is now considering a second bankruptcy filing, the people said, confirming what the The Wall Street Journal earlier reported.

Forever 21 filed for bankruptcy protection in 2019, and was later bought by a consortium including Authentic Brands Group and landlords Simon Property Group and Brookfield Property Partners.

The company’s first trip through Chapter 11 allowed it to restructure its balance sheet and end a number of costly leases,…