Fast-fashion chain Forever 21 filed for bankruptcy on Sunday (Sept 29), joining a list of brick-and-mortar retailers that have shuttered amid competition from online stores and changing shopping trends.
Founded in Los Angeles 1984 by a husband-and-wife team who immigrated from South Korea, the company expects to close up to 350 stores worldwide. These include up to 180 stores in the United States and most of the chain’s outlets in Asia and Europe.
Forever 21 currently has some 800 stores globally.
In Singapore, there used to be four Forever 21 stores, at 313 @ Somerset, Kallang Wave Mall, VivoCity and one right above Orchard MRT station.
There is now only one remaining store here, at 313 @ Somerset. Staff The Straits Times interviewed were aware of the news but said that the Singapore store is not closing.
Here are five things to know about the privately held retailer’s founders, Mr Do Won Chang and Mrs Jin Sook Chang, and their family-run business:
1. STARTING FROM SCRATCH
Mr Chang and his wife immigrated to California from South Korea in 1981, when he was 18.
When he was working at a Los Angeles petrol station, Mr Chang noticed the most expensive cars were driven by fashion retailers. He opened his first shop three years later, blocks away from the couple’s one-bedroom flat where they eventually brought up their daughters. Sales climbed from US$35,000 to US$700,000 in the first year.
“I feel truly blessed by Forever 21’s success. Forever 21 is my American Dream,” he told The Guardian in a 2011 interview.
2. A FAMILY AFFAIR
The Changs, who have 99 per cent ownership of Forever 21, roped their daughters in to help with the franchise.
Elder daughter Linda, who is in her late 30s, is an executive vice-president while Esther, in her early 30s, is the vice-president of merchandising.
Linda got an undergraduate business degree from the University of Pennsylvania, while Esther graduated from Cornell University with a degree in fashion and merchandising.
They took on leadership roles in the company when they were 27 and 24 respectively.
Taking a page out of their family business playbook, Linda and Esther also started beauty company Riley Rose.
3. FORMER BILLIONAIRES
Mr Chang and his wife were billionaires until their fortunes tumbled in July this year, according to Forbes.
In 2015, the couple had an estimated total net worth of US$5.9 billion (S$8.2 billion), but this amount fell to a combined US$600 million this year, ahead of the bankruptcy filing.
Earlier this year, the company reportedly sold its headquarters building for US$166 million, and in 2017, it took out a US$500 million loan from JPMorgan Chase.
4. TAPPING DAUGHTERS’ TRUST FUNDS
The Changs dipped into their daughters’ trust funds to keep the company afloat. They borrowed US$5 million in 2015 from the trusts for each of their daughters, paying them 2 per cent interest.
Linda and Esther are now named as unsecured creditors of their parents’ company in filings on Monday with Forever 21’s bankruptcy.
Despite its size and profile, the company has operated in near-total privacy in its business dealings, even as its sales by 2014 topped US$4 billion.
The documents did not specify how large the trust funds were or how big a portion of the funds were drained by the loans.
5. COURTING CONTROVERSY
Forever 21 and Riley Rose courted controversy when singer Ariana Grande sued Forever 21 in September this year for US$10 million.
Grande accused both companies of misappropriating her name, image, likeness and music – such as employing a “strikingly similar” looking model – in a website and social media campaign early this year.
The company is no stranger to lawsuits. In 2007, Belgian fashion designer Diane von Furstenberg filed a lawsuit against them for copying her designs, as did Gwen Stefani, Anna Sui and around 40 other labels.
Sources: The Straits Times, Forbes, The Guardian, Los Angeles Times