Forever 21 Cites Fierce Competition with Shein, Temu for Bankruptcy

Forever 21, once a dominant force in American fast fashion, has filed for Chapter 11 bankruptcy for the second time in six years.

The retailer announced plans to wind down its U.S. operations, citing intense competition from Chinese e-commerce giants Shein and Temu as a key factor in its downfall. Liquidation sales have already begun across its 354 U.S. stores, which are expected to close by May 1 unless a buyer emerges.

The company’s struggles reflect broader shifts in the retail landscape. Forever 21 has faced mounting challenges from rivals that leverage the “de minimis exemption,” a trade loophole allowing goods valued under $800 to enter the U.S. duty-free.

This exemption has enabled competitors like Shein and Temu to offer ultra-low prices, squeezing Forever 21’s margins and pricing it out of the market. "We’ve struggled to establish a viable path forward given competition from foreign fast-fashion companies," said Brad Sell, CFO of Forever 21’s operating company.

Forever 21’s financial woes are staggering. Over the last three fiscal years, the company has lost more than $400 million, including $150 million in 2024 alone, with projected losses of $180 million in EBITDA for 2025. Despite efforts to adapt—including a partnership with Shein in 2023—the retailer failed to regain its footing.

Catalyst Brands, which operates Forever 21 under Simon Property Group and Authentic Brands Group ownership, has been seeking strategic alternatives but has yet to secure a buyer.

Experts point to additional factors behind Forever 21’s decline. Neil Saunders of GlobalData noted that the brand struggled with outdated merchandising strategies, oversized stores in weak mall locations, and a lack of clear identity.

Sudip Mazumder of Publicis Sapient added that Forever 21’s fast-fashion model conflicted with growing consumer preferences for sustainability and quality.

Forever 21’s bankruptcy filing underscores the challenges facing legacy retailers amid changing consumer behaviors and economic pressures. While liquidation is underway, the company remains open to offers that could preserve some operations. However, any sale would reflect its diminished status as an industry player.

The collapse marks a significant shift for a brand that once defined fast fashion for American teens but now finds itself unable to compete in an increasingly digital and price-sensitive market dominated by global e-commerce leaders.