Why Forever 21 Went Bankrupt: The 3 Costly Mistakes That Led to Its Failure

Remember those big yellow shopping bags, overflowing racks of $5 crop tops, and packed stores at your local mall? That was the golden age of Forever 21, topping the list of budget-friendly fashion empires that made runway-inspired looks accessible to millions of young shoppers worldwide.

However, by March 2025, Forever 21 announced plans to shut down all U.S. operations, marking a significant retreat from the American retail landscape. This decline underscores the challenges traditional retailers face in adapting to the digital age and shifting consumer preferences.​ 

So, what went wrong with Forever 21? Why did it stumble again, even after getting a second chance? Let’s break down the three main reasons behind Forever 21’s downfall: a warning for any brand battling to survive in the cutthroat world of fast fashion.

Forever 21 - How a Fashion Empire Captured the Mass Market?
The Demise of Forever 21 - From Global Giant to Bankruptcy
The Downfall of Forever 21 - 3 Critical Mistakes That Sank the Brand

Forever 21 - How a Fashion Empire Captured the Mass Market?

It began in 1984 when Do Won Chang and his wife, Jin Sook Chang, Korean immigrants, opened a modest 900-square-foot store in Los Angeles under the name Fashion 21. The store targeted the Korean-American community with trendy yet affordable clothing, making $700,000 in sales in its very first year.

What made Forever 21 stand out in the crowded fashion industry was its “fast fashion” model. The brand quickly translated runway trends into budget-friendly apparel, often delivering them to stores within weeks. This lightning-speed supply chain attracted teens and young adults eager to wear the latest styles without breaking the bank.

Throughout the 2000s, Forever 21 aggressively expanded, both domestically and globally. Its large-format stores often replaced closed-down anchor stores in malls, giving the brand a strong physical presence. Celebrity endorsements, influencer marketing, and appeal to the Instagram generation helped cement its image as a go-to fashion destination.

By 2015, Forever 21 had become a $4.4 billion empire with over 800 stores in 57 countries, making it one of the largest specialty apparel retailers in the U.S.

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The Demise of Forever 21 - From Global Giant to Bankruptcy

First Bankruptcy Filing (2019)

In September 2019, Forever 21 filed for Chapter 11 bankruptcy, marking a pivotal turning point in the company’s history. This filing was a response to the brand’s mounting financial difficulties, which were driven by several factors such as declining sales, failure to compete in E-commerce & massive shift in consumer preferences, which we will discuss in detail in the upcoming section. 

The bankruptcy filing allowed Forever 21 to restructure its operations, renegotiate its debts, and attempt to turn its business around. The bankruptcy allowed Forever 21 to restructure operations and cut losses. It announced plans to close 178 stores globally and exit unprofitable international markets to focus on core regions like North America. 

The Role of Authentic Brands Group

After Forever 21’s first bankruptcy in 2019, it was acquired in early 2020 by Authentic Brands Group (ABG), along with Simon Property Group and Brookfield Properties. Known for reviving struggling retail brands, ABG aimed to reposition Forever 21 for a digital-first future. 

However, despite efforts like influencer collaborations, global expansion, and e-commerce upgrades, the brand couldn’t shake off its outdated image. The revival lacked long-term impact, and Forever 21 continued to lose relevance in a market dominated by agile, trend-savvy competitors.

Second Bankruptcy Filing (2025)

The second Chapter 11 bankruptcy filed by Forever 21 in 2025 followed several years of struggling to revive the business following the initial bankruptcy in 2019. Following the first bankruptcy, Forever 21 came under the ownership of Authentic Brands Group (ABG), a company known for reviving distressed retail brands like Aeropostale and Barneys New York. ABG, along with retail real estate giants Simon Property Group and Brookfield Properties, aimed to stabilize and reposition Forever 21.

Despite the strategic shift and financial backing, the brand continued to face deep-rooted structural issues, including an outdated business model, poor digital infrastructure, and a rapidly changing fashion landscape. Even with new management, Forever 21 struggled to shake off its "fast fashion dinosaur" image. The management’s efforts, like digital collaborations, celebrity partnerships, and product line revamps, failed to resonate long-term with modern shoppers.

The second bankruptcy filing in 2025 reflected deeper structural issues within Forever 21’s business model, which were exacerbated by external factors such as the decline of mall-based shopping and the rapid rise of e-commerce. Despite its early success, Forever 21 struggled to adapt to the changing retail environment and ultimately became another casualty of the shifting dynamics of the fashion industry. As a result, they closed all U.S. stores. 

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The Downfall of Forever 21 - 3 Critical Mistakes That Sank the Brand

Overexpansion and the Decline of Mall Traffic

Forever 21’s aggressive expansion strategy, which initially seemed like a winning formula, began to backfire. The brand’s massive stores in prime mall locations were once a key to its success. However, as e-commerce gained popularity and consumer preferences shifted, physical retail lost its appeal. Malls, which had once been bustling hubs for shopping, saw a decline in foot traffic, impacting brands like Forever 21 that relied heavily on in-person sales.

By the time Forever 21 realized the shift in consumer behavior, it was left with a large number of underperforming stores that drained resources. The high overhead costs of maintaining these locations proved unsustainable, especially as more consumers embraced online shopping. This contributed to the brand’s first bankruptcy filing in 2019.

Missed E-Commerce Opportunity

While competitors like Zara, H&M, and ASOS rapidly adapted to the digital era, Forever 21 lagged.  The company’s e-commerce platform remained outdated, offering a cumbersome shopping experience that couldn’t compete with more user-friendly, efficient websites.

Even after Forever 21 attempted to revamp its online presence, the damage was done. The brand struggled to shed its outdated image, with digital-first competitors like Shein gaining significant market share. Forever 21 couldn’t effectively meet the evolving needs of consumers who preferred shopping online, contributing to a steady decline in its customer base.

Changing Consumer Preferences and Ethical Concerns

Perhaps the most significant factor in Forever 21’s downfall was its failure to evolve alongside changing consumer values. As sustainability became a key concern for modern shoppers, Forever 21’s fast-fashion model drew increasing scrutiny for its environmental impact. Brands like Patagonia and Everlane, which prioritized ethical production and sustainability, grew in popularity, especially among millennials and Gen Z.

Additionally, Forever 21 struggled with inclusivity, particularly with size diversity, and failed to respond to growing demands for body-positive fashion. Forever 21's failure to adapt to these shifts caused its once-loyal customer base to move on to more aligned competitors.

Lessons Learned and Conclusion

The downfall of Forever 21 serves as a powerful reminder that adapting to the fast-changing retail world is crucial. The brand failed to keep up with consumer behavior changes and digital transformation. Despite the growing popularity of e-commerce and mobile-first experiences, Forever 21 continued to rely heavily on outdated physical retail strategies. The brand appeared out of touch with modern shoppers due to its inability to adapt to a tech-driven world.

Forever 21 was once the go-to mall brand, but after two bankruptcies, its story is now a warning for businesses everywhere. It adapted and changed fast fashion forever, but when it refused to rethink its old ways, it fell behind its competitors. Its downfall proves one thing: in retail, you can’t just chase trends, you have to plan, innovate, and grow smartly to survive. Forever 21’s legacy reminds us that in business, growth without innovation is simply a countdown to collapse.

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FAQs

Is Forever 21 owned by Shein?

Shein acquired a one-third stake in Forever 21's operating company, Sparc Group.

Why is Forever 21 closed in India?

The decision to potentially close Forever 21 stores was influenced by years of financial losses they have incurred, leading to withheld royalties and rent payments to maintain operations.

Is Forever 21 an Indian brand?

Forever 21, is an American multinational fast-fashion retailer headquartered in Los Angeles, California.