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Is Forever 21's rough patch getting worse? The brand synonymous with cavernous stores filled with $9 tops was already having trouble paying its bills on time, according to a New York Post report in April.
Now the Wall Street Journal reports that Forever 21's exclusive shipping firm, EZ Worldwide Express, is canceling its contract with the mega-brand. The shipping firm filed for bankruptcy in January, and its lawyers said in court that F21's "business has declined precipitously."
Court documents filed in May read: "[Weekly] sales to Forever 21 have ranged from a low of $352,483 to a high of $428,764. These numbers are drastically lower than the same five week period last year, where weekly sales ranged from $629,817 to $780,730."
Meanwhile, things are shaky right now for Forever 21 in the UK too, the Telegraph just reported last week. The brand is currently evaluating its real estate profile there, and may cut down the size of some of its stores. Several UK F21 stores have already closed, and will be replaced by H&M locations.
So what's the trouble at Forever 21 — or more accurately, what's the trouble with fast fashion? H&M just posted its weakest quarterly sales growth in three years, and Urban Outfitters reported falling same-store sales this quarter, causing its stock to plunge. (And of course, mall brands are suffering the most.) As the New York Times explained, there may be an industry-wide problem of "weak demand."
Is too many stores the problem? In 2014, Forever 21 ambitions to compete with H&M by doubling its stores locations. Flash-forward to 2016, and F21 is battling reports that it is overextended thanks to its real estate portfolio of stores.
What's the solution? Perhaps Forever 21 should look to Zara: Of the fast fashion mega-brands, it seems that Zara is the one weathering the storm best, with a 6% rise in profits in the first quarter.
Update, June 28th, 3:43pm: Forever 21 released the following statement to Racked about its separation from EZ Worldwide Express:
Forever 21 and EZ Worldwide Express came to an agreement to separate, after EZ’s difficult financial conditions meant that it could no longer provide the same delivery services. Forever 21 looked at different financing options to assist EZ during its difficult financial time in order to continue the relationship, but were unable to come to an agreement. Accordingly, Forever 21 transitioned to other delivery providers and accepted the termination agreement with EZ, in order to continue to provide the exceptional experience our customers have come to expect from us.