American fast-fashion retailer Forever 21 is officially closing 200 stores following its bankruptcy announcement last September.
The retail giant admits that the store leases have hurt the company’s revenue, in addition to the emergence of online shopping. The company has over 549 stores in the United States and 251 in other countries, paying almost $450 million for the leases alone.
“They will have a much lower cost structure overall, which will clearly help the bottom line. The remaining stores will likely generate a significantly higher profit than before,” said restructuring expert Van Horn.
Forever 21 announced that it would close stores in international markets, including Europe, Asia, and Canada. It will focus on smaller locations in the United States, Latin America, and Mexico.
Retail restructuring experts like Jim Van Horn believes that Forever 21 can emerge from bankruptcies, with the help of good financial advisors and the landlords.
Currently, the landlords showed support to the retail company, however, store closures were expected. With less foot traffic in malls, the retailer suffered sales losses in the past years, especially in 2018.
Excessive floor space
The total square feet that the company holds is 12.2 million. As part of the sales strategy overhaul, the company came with the idea that they occupy ‘excessive floor space.’ There is a need to end this shift to new locations with relatively smaller spaces to save on the lease.
Some analysts are still positive about the company’s position, saying that they only need two to three years to get back out there.
The expensive store lease is not the major problem of retail businesses. The changing trends in shopping have brought massive damage to some stores, losing bigger sales.
Amazon is among the competitors of retail businesses as more people shift to online shopping.
F21 was founded in 1984 along with fast-fashion brands like H&M and Zara.