Forever 21 goes belly-up and will shutter all US stores, blames Temu and Shein

Forever 21 has filed for bankruptcy protection for the second time in six years, citing fierce competition from online fast-fashion giants Shein and Temu as a major factor for its financial struggles.The retailer’s operating company is set to shut down all US operations, with liquidation sales already underway at more than 350 locations.The company said it remains open to potential buyers willing to acquire its inventory and keep the stores running, according to court filings.Efforts to secure a buyer over the past several months have been unsuccessful.

Forever 21 reached out to over 200 potential investors, with 30 signing confidentiality agreements, but no viable deal emerged.The company had been engaged in talks with liquidators and faced significant challenges in attracting a buyer willing to sustain the business, according to CNBC.The company’s second bankruptcy follows a tumultuous period.After emerging from its first filing, Forever 21 faced economic turbulence due to the COVID-19 pandemic, inflationary pressures and increased competition from newcomers Shein and Temu.In court filings, Stephen Coulombe, co-chief restructuring officer of the company, attributed some of its financial troubles to Shein and Temu’s ability to leverage the “de minimis exemption.”The trade law loophole allows imports valued under $800 to enter the US duty-free, a practice Coulombe claims put Forever 21 at a competitive disadvantage.“Certain non-US 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,” Coulombe stated in court documents.“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.”Despite repeated calls from US companies and industry groups to amend the exemption and create a fairer marketplace, no changes hav...