Forever 21 Enters Deal to Sell Retail Business for $81 Million
Forever 21 has reached an $81 million deal to sell its retail business to a consortium made up of mall operators Simon Property Group and Brookfield Properties, and brand management firm Authentic Brands Group. In a bankruptcy court filing, the mall-based retailer said it's seeking approval to name the three as the lead "stalking-horse bidders" in an auction. (A stalking-horse bid is an initial bid on the assets of a bankrupt company and the deal remains subject to approval by a judge.) The sale would include all of Forever 21's assets, including its retail stores and its beauty line RileyRose. Rival bidders have until Feb. 7 to make any counteroffers, the filing said. If other bids are made, an auction will be held on Feb. 10. Forever 21 is planning to seek approval of the sale by Feb. 11. Forever 21 filed for Chapter 11 bankruptcy protection on Sept. 29, 2019. The privately held company based in Los Angeles said at the time that as part of its restructuring in bankruptcy, it would close up to 178 stores, focus on maximizing the value of the U.S. stores that would remain open, and shutter some international locations. The ability to get out of leases and close stores at lower cost is a key advantage that the bankruptcy process affords retailers.
Total Retail's Take: It's interesting that Forever 21 was given a lifeline, in part, by two real estate giants it works with. Simon and Brookfield are Forever 21′s biggest landlords, and Simon’s malls have nearly 100 Forever 21 stores. While it's uncommon for retailers to be purchased by real estate companies, it's not unprecedented. In 2016, for example, Simon and mall owner General Growth Properties, which is now owned by Brookfield Property Partners, teamed up to rescue embattled teen apparel retailer Aeropostale. The two were part of a group that ultimately won an auction to buy the Aeropostale brand out of bankruptcy court, salvaging its real estate. Authentic Brands Group is the other bidder, and in late 2019 it bought the rights in bankruptcy court to the Barneys New York brand name.
Hopefully the new arrangement will keep Forever 21 stores open for business. The company was founded in 1984 and, along with other fast-fashion chains like H&M and Zara, rode a wave of popularity among young shoppers that took off in the mid-1990s. It won over customers from traditional stalwarts like Abercrombie & Fitch and American Eagle, and its popularity grew during the Great Recession, when shoppers sought fashion bargains. But Forever 21 went on an aggressive expansion of stores just as shoppers were moving online and thus joined a long list of retailers that have fallen victim to changing shopping behaviors and preferences among teens, who have increasingly turned away from malls in favor of online brands or thrift stores.
