Retail crisis: Forever 21 to close 200 stores amid new bankruptcy proceedings

On February 19, 2025, Bloomberg News reported that Forever 21 is preparing to close at least 200 stores in the United States as part of a second bankruptcy filing, expected to begin soon. This new bankruptcy comes amid efforts to find a buyer for the fashion retailer, which still operates about 350 stores. If the chain is unsuccessful in attracting a qualified buyer, it will likely liquidate.

Forever 21, known globally for its fast-fashion model, has previously gone through bankruptcy proceedings and was acquired by Authentic Brands, which currently owns the brand and intellectual property. This complex situation involves not only store closures, but also the possible sale of the remaining operation or its complete liquidation. However, even amid these challenges, Authentic Brands still maintains ownership of the brand intact, with plans to continue licensing Forever 21 to other retailers and distributors regardless of the outcome of the bankruptcy proceedings of Catalyst Brands, the chain’s current operator.

Catalyst Brands, which operates Forever 21, was formed from the merger of JCPenney and SPARC Group and is currently undergoing Chapter 11 reorganization, which allows the company to continue operating while it seeks a solution to its debts and financial restructuring. This process, typical of bankruptcy cases in the United States, aims to avoid the immediate closure of the company, giving time to negotiate with creditors and seek new investors.

However, the legal impact of a bankruptcy of this size is not limited to the stores that will be closed. There are numerous contractual and legal issues that need to be considered. Relationships with suppliers, space leases, labor rights and brand licensing agreements are some of the points that must be addressed carefully during this process.

Fashion companies facing bankruptcy proceedings, especially in the retail sector, need specialized legal counsel to deal with the legal and financial consequences. Issues related to debt renegotiation, brand and intellectual property protection, as well as possible legal disputes with creditors, can directly impact the company's future. Furthermore, the impact of this bankruptcy on the fashion market as a whole is significant, as it directly affects consumers, suppliers and other industry players.

In this scenario, it is essential that companies in the fashion sector are prepared to deal with financial and legal crises, ensuring that all their operations are in compliance with current laws and that the company's interests are protected.

If you work in the fashion sector and need legal advice to deal with financial crises or bankruptcy proceedings, we can help you with all legal aspects, ensuring the protection of your brand and the best strategy to overcome challenging times.