Burst: The US Fast Fashion Cheap Retailer Forever 21 Is About To Go Bankrupt.

Bloomberg quoted sources on Wednesday as saying that the US fast fashion cheap retailer Forever 21 Inc. was bankrupt soon because the company had tight cash flow and was unable to make a substantial profit loss plan.

Forever 21 had already sought to restructure its debt to enhance liquidity by reversing struggles for many years, but sources said Wednesday that negotiations were deadlocked. The company is seeking debt in possession financing to enter bankruptcy protection procedures.

In June, the market has said that Forever 21 drew private Holdings Company Apollo Global Management LLC to prepare for DIP financing, Forever 21 responded and stressed that dialogue with creditors is normal business process, and the Group continues to operate as usual.

Forever 21 was once one of the iconic brands of the American dream. The Korean American Do Won Chang and the Jin Sook Chang couple opened the first Forever 21 (formerly known as Fashion 21) in Losangeles, California in 1984, and sold Korean fashion clothes to the Korean community in the locals. Forever 21 now has hundreds of stores in North America, Europe, Asia and Latin America, which contain a large number of flagship stores, which is a great pressure on the group's sales and profits.

As consumption patterns change and competition intensifies in the industry, retailers with larger physical burdens tend to decay faster. Moreover, Forever 21 oriented youth groups generally lack brand loyalty, which indirectly leads to the bankruptcy of American Apparel, A ropostale, Rue21, Wet Seal and other American youth apparel retailers in recent years.

Forever 21 declined to comment on the latest claims for bankruptcy protection. According to people familiar with the matter, the US fast fashion brand is trying to shut down a bad store through Chapter 11, but it may need to discuss with the two real estate trusts of the United States, Simon Property Group Inc. (NYSE:SPG) Simon real estate and Brookfield Property Partners LP.

David Simon, chief executive of Simon real estate, said earlier that it would consider helping some troubled retailers, including investment, to ensure that they could continue to operate. The company previously participated in the rescue of teenage brand Aeropostale Inc..

In the past two weeks, a series of earnings reports of US retailers showed the most dismal retail market since the great recession in 2008. According to the data of Retail Metrics Inc., the profit of apparel listed companies decreased by 24% in the first quarter of 2019, which is the biggest decline in the same period of 2008, which has fallen 40%.

Ken Perkins, founder of Retail Metrics Inc., points out that although consumer confidence is high, retailers who are shopping in the majority of physical businesses are facing the problem of accelerating passenger traffic decline. Analysts believe that clothing sales are still strong, but consumers no longer patronize past shopping places.

As a private sector, Forever 21 Inc. does not disclose publicly its financial performance. It is reported that the group achieved $3 billion 800 million in revenue in 2014 and has declined to $3 billion 400 million by 2017.

People familiar with the matter said the group's international business was weaker than domestic sales. Following the withdrawal of Taiwan in March this year, Forever 21 Inc. confirmed in April that it had withdrawn from the 2008 mainland China's two market entry in 2011. In Hongkong, the group moved to Mong Kok in 2016 because it could not afford Tongluowan's six tier flagship store's monthly rental of HK $13 million 800 thousand.

In recent years, together with Forever 21 Inc., China has also lost its brand names such as Topshop, New Look, Marks and Spencer Group PLC (MKS.L), Marsha general merchandise and so on. What's more, even the UK's fashion e-commerce supplier, the world's largest e-commerce group, is also struggling to compete with Chinese local businesses with cost-effective and marketing methods that are more in line with market demand and cost advantages.

At present, Forever 21 Inc. operates more than 800 stores. Once filing for bankruptcy protection, it may close at least 20% stores.