Mar. 17, 2025 "Forever 21 files for bankruptcy in U.S. for 2nd time": Today I found this article on CBC:
Forever 21's U.S. operator on Sunday filed for bankruptcy for the second time in six years
and said it would wind down operations in the country,
hurt by mounting online competition in the fast-fashion sector
and weak mall traffic.
It blamed the situation on higher costs
and companies taking advantage of duty-free treatment of low-cost packages from China
to undermine its pricing power.
"We've been unable to find a sustainable path forward, given competition from foreign fast-fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin," said Brad Sell, finance chief at F21 OpCo, which operates Forever 21's roughly 350 U.S. stores.
De minimis refers to the U.S. waiver of standard customs procedures and tariffs on imported items worth less than $800 that are shipped to individuals
and helps Chinese online retailers such as Shein and Temu to keep prices ultra-low.
U.S. President Donald Trump paused his administration's repeal of the clause as part of the fresh tariffs imposed on China in February.
Mega-mall era ends
Founded in Los Angeles in 1984 by South Korean immigrants, Forever 21 at its height was popular among young shoppers on the prowl for stylish but affordable clothing.
By 2016, it was operating around 800 stores globally,
with 500 of those in the United States.
But, the rise of e-commerce retailers and the slow death of the American mega mall hurt apparel companies such as
Forever 21
and Bonobos-parent Express, which filed for bankruptcy last year.
"Brick-and-mortar retailers like Forever 21 operate in a highly competitive environment where the cost of doing business is expensive and rising with inflation rates," said Sarah Foss, head of legal and restructuring at Debtwire, which provides data and analytics on leveraged loans.
The retail sector saw 20 bankruptcy filings since the start of 2024,
while 25 retail chains have had at least two bankruptcy filings since 2016,
according to Debtwire data.
F21 OpCo is planning for liquidation sales at its U.S. stores, while it goes through a court-supervised sale and marketing process for its assets, which it estimated to be worth around $100 million to $500 million US.
Its U.S. stores and website will remain open through the process
and its international stores will remain unaffected.
It has liabilities in the range of $1 billion to $10 billion US, according to a filing with bankruptcy court in the District of Delaware.
In the event of a successful sale, Forever 21 said it may pivot away from a full wind down of operations to facilitate a going-concern transaction.
Forever 21 previously filed for bankruptcy protection in 2019
and was brought out of it by Sparc Group,
a joint venture between label owner Authentic Brands Group
and mall operators Simon Property
and Brookfield Asset Management.
It is now owned by Catalyst Brands, an entity formed on Jan. 8 through the merger of Forever 21's previous owner, Sparc Group, and JC Penney, a department store chain owned since 2020 by mall operators and Simon Property Group.
When Catalyst Brands was formed, it said it was "exploring strategic options" for Forever 21.
Authentic Brands will continue to own Forever 21's trademark and intellectual property, which could live on in some form. Its CEO Jamie Salter last year called acquiring Forever 21 "the biggest mistake I made."
https://www.cbc.ca/news/business/forever-21-bankruptcy-filing-1.7485294
My opinion: There's a Forever 21 in Kingsway mall.
There's a Forever 21 section in the store Urban Behavior at West Edmonton mall.
Jun. 11, 2025 "Reitmans shareholder group calls on others to join fight to boost retailer’s value": Today I found this article by Tara Deschamps on BNN Bloomberg:
A group of Reitmans Ltd. shareholders have released their second letter in two months urging the apparel retailer to address its stagnating value, saying they want to
replace two board directors
and end the company’s dual-class share structure.
The open letter published Wednesday is from Donville Kent Asset Management Inc., Parma Investments Ltd. and an unnamed private investor. They collectively own more than 5.5 million class A shares in Reitmans and another 1.1 million common shares in the company.
In the letter, they reiterated their claim from a May 13 letter that Reitmans has demonstrated
“consistently poor decision making”
and ignored their requests to explore how the company could unlock more value for shareholders.
As of May 12, the company’s market capitalization was $105 million
— lower than its net cash holdings of $158 million,
and well below its net worth on paper of $280 million, the concerned shareholders say.
This means the business was valued at less than the cash it held.
To boost the way the market perceives the retailer, the shareholders want the company to drop its dual-class share structure and
move from the TSX Venture Exchange, “a junior market typically suited for emerging companies,”
to the main Toronto Stock Exchange.
In response to the May letter, Reitmans said it has been in communication with Donville Kent and Parma for many quarters and “regularly evaluates options to optimize shareholder returns.”
But the shareholders maintain boosting the company’s value has fallen by the wayside because of executive chairman Stephen Reitman and his alleged “complete dominance overboard members.”
Reitman is the grandson of the company’s founders, Herman and Sarah Reitman. His family owns, on an aggregate basis, the equivalent of 21.67 per cent of the company’s shares, including a majority of the voting common shares.
Stephen Reitman has worked at the retailer for about 50 years and is well into his seventies.
He held the CEO job when the almost 100-year-old business filed for creditor protection in May 2020, citing the COVID-19 pandemic as one of the reasons for its recent woes.
The Montreal-based company rebounded after a restructuring but in order to survive it had to
close 160 stores,
cut 1,400 employees
and dump its Addition Elle
and Thyme Maternity brands.
Its RW & Co.
and Penningtons banners remain.
The shareholders behind the Wednesday letter argue it’s now time for the company to
collapse its dual-class share structure
and graduate to the Toronto Stock Exchange.
They say a TSX listing would elevate Reitmans’ profile among investors, including large institutions, result in a more accurate valuation of shares and provide it with more room to grow.
They also want a board shake up and say they are intending to vote against the reappointment of Bruce Guerriero and Daniel Rabinowicz “due to independence issues and a clear misalignment with the interests of all shareholders.”
Instead, they’d like to see Jesse Gamble, senior vice-president at Donville Kent Asset Management, and Deborah Honig, president at Adelaide Capital, join the board as independent directors.
In response, Reitmans says its ownership structure has been in place for many years and independent board members have long provided deep expertise to the business.
“We would like to stress in the strongest possible terms our confidence in the performance and objectivity of each of our independent directors and that any allegations that have recently been made impugning the independence of certain of our independent directors are false and wholly without merit,” the company said in a statement.
“There should be no doubt whatsoever as to this fact, and (we) categorically reject any assertion to the contrary.”
Since their first open letter was sent on May 13, the concerned shareholders say they have racked up support from organizations and people holding nearly 41 per cent of the shares not held by the Reitman family.
This report by The Canadian Press was first published June 11, 2025.
Tara Deschamps, The Canadian Press
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