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Forever 21 rumored to file Chapter 11 bankruptcy

The famous Los Angeles based fast-fashion retailer Forever 21, with 723 locations, is filing for Chapter 11 bankruptcy , according to The Wall Street Journal.  

Filing for Chapter 11 bankruptcy would allow Forever 21 to close down the stores going through loss, and to replace it with a smaller company. 

So far, three unknown people are said to have reported about the bankruptcy and virtually 700 stores claim to have closed down. 

However, the company stated that the reports were flawed as one of the company’s representatives announced, “Our stores are open and it is our intention to continue to operate the vast majority of U.S. stores.” 

Regardless of what the truth is, Forever 21 has been greatly affected by the lack of consumers lately. At present, teens and adults prefer online shopping from Amazon or Fashion Nova, a popular brand best known for cheap prices and imitating celebrity looks, because of the easy accessibility. 

Fashion Nova’s increasing number of products in the market is causing higher competition for Forever 21. The replenishment rate for Fashion Nova is 48% while it is 14% for Forever 21, according to Edited, a retail technology company which adds about 80 billion data points each day. 

The replenishment rates show how much of the supplies are replaced by new ones depending on conditions like the demand or even changes in the seasons. 

Forever 21’s low replenishment rates indicate low demands by consumers causing the company to face a decline in its sales. Recently, Forever 21 hired advisers to revise ways to help the debt incurred, according to Bloomberg

“Latham & Watkins LLP is on board to help renegotiate leases that could involve shuttering stores, and Alvarez & Marsal was hired to overhaul operations,” The Wall Street Journal added

However, when further questioned, Forever 21 did not comment on the company’s next steps. The main concern is if Forever 21 is truly filing for bankruptcy, it would cause more rifts to the company. 

This is in part due to the company’s issues with the lawsuit containing copyright infringements from the famous pop-star, Ariana Grande.  

Almost two weeks ago, Grande sued Forever 21 for promoting their clothing products for free through a look-alike model. 

Grande claims Forever 21 and Riley Rose, a beauty store, replaced her name, music and image including clothing and hairstyle to promote their brands, as seen in a recent article by CNN

“Grande’s legal team alleges the clothing company sought out an endorsement deal with Grande but the request was ‘explicitly declined due to Forever 21’s unwillingness to pay the fair market value for a celebrity of Ms. Grande’s stature,’” CNN further added

What happens to Forever 21 is yet to be seen as they deal with the lawsuit alongside Chapter 11 bankruptcy.

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