Forever 21 Exits U.S. Market, Blames Shein & Temu

Forever 21, once a dominant force in American mall culture and a fast-fashion pioneer, has filed for bankruptcy protection for the second time in six years. This time, the outlook is even more grim. The operating company behind the brand is expected to liquidate all U.S. operations and close more than 350 stores across the country. While the brand itself—owned by Authentic Brands Group (ABG)—will live on internationally and online, its physical retail presence in the U.S. appears to be nearing its end.

A Fall from Fast-Fashion Grace

Founded in 1984, Forever 21 quickly became synonymous with trendy, affordable fashion for teens and young adults. At its peak, the company employed over 43,000 people and generated more than $4 billion in annual revenue. It was a mainstay in nearly every major mall in America, offering a constantly rotating inventory of inexpensive clothing that aligned perfectly with the rise of social media and instant fashion gratification.

But the retail landscape has changed dramatically. Since its first bankruptcy filing in 2019, Forever 21 has struggled to find its footing, facing wave after wave of new challenges: the COVID-19 pandemic, historic inflation, supply chain issues, and perhaps most significantly, fierce competition from Chinese-founded digital-native fast fashion giants like Shein and Temu.

The Shein and Temu Disruption

The latest bankruptcy filing blames Shein and Temu directly for Forever 21’s financial collapse. These e-commerce powerhouses have leveraged a controversial trade loophole known as the de minimis exemption, which allows goods under $800 in value to enter the U.S. without paying import duties. That exemption gives Shein and Temu a critical pricing edge, enabling them to sell clothing at razor-thin margins that Forever 21, with physical stores and tariff obligations, simply couldn’t match.

Stephen Coulombe, the operating company’s co-chief restructuring officer, noted in court documents that the company was “materially and negatively impacted” by this policy imbalance, which allowed overseas competitors to “undercut” Forever 21’s pricing model.

Despite efforts to level the playing field—including a 2023 partnership between Forever 21 and Shein—no meaningful regulatory changes were enacted, and the collaboration failed to turn around the company’s financial woes.

Mounting Losses and Unsuccessful Rescue Attempts

Since its 2019 restructuring, Forever 21 showed brief signs of recovery. It was acquired by a consortium that included Authentic Brands Group and retail property giants Simon Property Group and Brookfield Property Partners. In fiscal 2021, the brand even generated $2 billion in revenue and $165 million in EBITDA.

But those gains didn’t last. Rising costs, shifting consumer behavior, and intensifying e-commerce competition led to a decline that resulted in more than $400 million in losses over the past three fiscal years, including a projected $180 million loss through 2025. Despite contacting more than 200 potential buyers—30 of whom signed NDAs—no deal materialized, and liquidation proceedings began in early 2025.

The operating company currently owes $1.58 billion in loans and over $100 million to apparel manufacturers, mostly in China and South Korea.

What’s Next for the Brand?

While the U.S. retail operations are shutting down, the Forever 21 brand is not disappearing entirely. Authentic Brands Group, known for its IP-focused brand management model, will retain ownership of the brand name, trademarks, and other assets. International stores and e-commerce channels are expected to continue operating, and ABG is reportedly fielding interest from new operators and digital-native partners to potentially relaunch Forever 21 in a modernized, leaner format.

“This restructuring presents an opportunity to accelerate the modernization of the brand’s distribution model,” said Jarrod Weber, Global President of Lifestyle at ABG. “We’re receiving strong interest from brand operators and digital experts ready to take Forever 21 to the next level.”

A Broader Industry Reckoning

Forever 21’s collapse is more than just the downfall of another legacy retailer—it’s a reflection of the massive shifts reshaping the fashion industry. The rise of direct-to-consumer e-commerce, the efficiency of global logistics networks, and the ruthlessly low prices offered by digital-first brands have upended the traditional fast-fashion model.

Brick-and-mortar chains that once thrived in malls are now burdened by overhead costs and sluggish supply chains, while ultra-agile platforms like Shein pump out thousands of new SKUs weekly, responding to trends in real time. It’s an evolution that doesn’t just threaten traditional retailers—it renders them obsolete if they can’t adapt.

Forever 21’s story is ultimately a cautionary tale: adapt or vanish. And in today’s fashion world, speed, efficiency, and digital-first thinking aren’t optional—they’re survival.