Forever 21 looks to sell itself in bankruptcy

Dive Brief:

After initially trying to reorganize in Chapter 11, Forever 21 is now looking to sell itself during the bankruptcy process, according to court filings.
Forever 21 is "engaged in substantial, round-the-clock negotiations" with unnamed parties around a potential stalking horse bid, which would set a baseline for an auction, to buy the company as a going concern, attorneys said in court papers. The company also said it was soliciting bids "for alternative transaction structures."
The company proposed a bid deadline for Feb. 7, with an auction on Feb. 10 and a hearing to approve any potential sale the following day.

Dive Insight:

When it first filed for Chapter 11 in September, Forever 21 signaled plans to close around 180, or roughly a third, of its stores in the U.S., and exit most of its stores in Europe and Asia to better focus on Latin America and the U.S.

Now Forever 21 is abandoning its plan to reorganize, opting for a sale of "substantially all" of its assets instead. Advisers for the fast-fashion retailer, with the backing of its lenders, reached out to more than 115 potential buyers for the retailer starting in November, with 50 signing nondisclosure agreements to access in-depth information.

While the company requested bid protections for a possible stalking horse buyer, it didn't signal who it was talking with. Citing unnamed sources, Bloomberg reported earlier in January that Simon Property Group — a major landlord to Forever 21 — and Authentic Brands Group were considering a bid for the bankrupt retailer.

At the time the company filed for bankruptcy, some observers, pointing to the retailer's failure to keep up with its core customer base of young adults, were skeptical of Forever 21's plans to right-size itself.

With its first store opening in the 1980s, just a few years after founding couple Jin Sook and Do Won Chang arrived in the U.S., the retailer had a focus on looking ahead at fashion trends. Over the years, fast fashion powerhouse competitors like H&M and Zara came to dominate the market. Today, fast fashion is starting to fall out of favor in part because of sustainability concerns. Debt-fueled expansion, attachment to malls and the control of the Chang family all took their toll on Forever 21 as well.