Fast-fashion retailer Forever 21 has filed for bankruptcy protection for the second time in six years, citing intense competition from e-commerce giants Shein and Temu. The brand’s U.S. operations are set to shut down, with liquidation sales already underway at over 350 store locations. While the brand remains open for bids, no viable buyers have emerged despite outreach to more than 200 potential investors.

This closure marks the end of an era for Forever 21’s U.S. workforce. At its peak, the retailer employed 43,000 people and generated more than $4 billion in annual sales. However, the current shutdown raises concerns about the fate of thousands of employees, many of whom will soon be without jobs.

Impact on Employees

The closure of Forever 21’s operating headquarters follows an earlier downsizing at its parent company, Catalyst Brands, which laid off 250 employees last month. With the retailer’s U.S. operations ceasing, store employees, warehouse staff, and corporate workers face an uncertain future. Severance packages, if any, have not been disclosed, leaving many employees in limbo.

Some retail analysts believe that mall landlords and related stakeholders may offer temporary positions to displaced workers as they seek to repurpose Forever 21’s retail spaces. However, given the broader decline in brick-and-mortar retail, large-scale reemployment remains uncertain.

Why Forever 21 is Shutting Down

Forever 21’s demise has been attributed to multiple factors, including the COVID-19 pandemic, inflation, and shifting consumer preferences. However, one of the biggest challenges has been the rise of Shein and Temu, which have leveraged the de minimis exemption—a trade loophole allowing imported goods under $800 to enter the U.S. duty-free. This has given them a competitive edge by offering significantly lower prices, making it difficult for traditional retailers like Forever 21 to compete.

Despite attempts to counter Shein’s dominance, including a partnership in 2023, Forever 21 struggled to regain profitability. The retailer has lost over $400 million in the last three fiscal years, including $150 million in 2024 alone. Even cost-cutting measures, such as requesting rent reductions from landlords, failed to prevent the inevitable bankruptcy filing.

Is This the End of Forever 21?

Although the operating company is shutting down, Forever 21’s brand name and intellectual property remain intact under Authentic Brands Group. The retailer’s international stores and e-commerce platform are expected to continue operations, and there is a possibility that new operators may emerge to run the business in the U.S. in the future.

Jarrod Weber, Global President of Lifestyle at Authentic Brands Group, stated that there is strong interest from potential operators who share a vision for revitalizing the brand. This means that while Forever 21’s current structure is collapsing, the brand itself may still have a future, albeit under new leadership.

For now, employees face a difficult transition as they navigate job losses amid an uncertain retail landscape. The broader implications of Forever 21’s shutdown underscore the challenges traditional retailers face in an evolving digital economy dominated by fast-moving, low-cost e-commerce platforms.