Forever 21 . Image: Facebook.com/Forever21

Forever 21 . Image: Facebook.com/Forever21

US retailers in SA are filing for bankruptcy: Forever 21 becomes the latest

Retailers restructuring after suffering loses because of online store sales.

Forever 21 . Image: Facebook.com/Forever21

Forever 21 . Image: Facebook.com/Forever21

United States’ (US) retailers with physical stores have been filing for bankruptcy in recent years. Some of the brands also have stores in South Africa (SA).

Toys ‘R’ Us filed for bankruptcy

Toys-R-Us
Photo: Facebook

One store which filed for bankruptcy in the US in 2018 was Toys ‘R’ Us. However, their filing didn’t affect Southern Africa according to Toys ‘R’ Us and Babies ‘R’ Us SA marketing manager Nicole Annells.

Reports state it would be “business as usual” for local operations because they are privately managed. Despite this, retailers would continue to pay royalties to the international company, as per its agreement.

Starbucks files for bankruptcy, plans to close 150 stores

(Photo by Justin Sullivan/Getty Images)

Another store which planned on closing 150 company-operated locations in 2019 was Starbucks. The closures would mainly be seen in heavily saturated markets in an effort to improve profitability.

However, the Seattle-based company hasn’t mentioned closures of its 13 South African stores. In March 2019, Diesel USA also filed for Chapter 11 protection in the US Bankruptcy Court.

Forever 21 plans to restructure

Forever 21
Forever 21. Photo: Facebook/Forever 21

The latest retailer to file was Forever 21 Incorporated (Inc). On Sunday, the fashion retailer filed due to the competitive e-commerce sector that has had physical stores struggling.

More people have opted to use online retailers like Amazon Inc over the past years. The shift has caused more than 20 US retailers to file for bankruptcy.

Funds to help the bankrupt retailer up its game

Forever 21 filed at the US Bankruptcy Court for the District of Delaware. It listed both assets and liabilities in the range of $1 billion to $10 billion (more than R15 billion to R151 billion).  

The retailer stated how it had received $275 million (more than R4 billion) in financing from their existing lenders. The lenders were JPMorgan Chase Bank, NA as agent, and Forever 21 also received $75 million (more than R1 billion) in new capital from TPG Sixth Street Partners.

The money the company received would allow them to run their business as per normal. However, they would be focusing on the profitable core part of their operations.

Forever 21 to close some stores

Despite this plan, Forever 21 still intends on closing most of their international locations in Asia and Europe. Their Mexico and Latin America stores will continue operating.

The retailer, founded in 1984, has 815 stores in 57 countries. Last week, it said it would leave Japan and close all 14 stores at the end of October.

The company’s legal adviser is Kirkland & Ellis LLP and Alvarez & Marsal advised on restructuring while Lazard acted as their investment banker.