Forever 21 is exploring restructuring options to shore up its liquidity as the fast-fashion giant struggles with its business, a person familiar with the situation said on Monday.
The company is in talks with private equity firm Apollo Global Management about raising debtor-in-possession funds to provide financing should it file for bankruptcy, the person said. The person cautioned that no decisions have yet been made.
The talks come as the apparel industry continues to struggle amid sweeping changes, including the shift of more purchases online. Many of the most troubled retailers, like Forever 21, are located in malls, where fewer shoppers are spending their money. As sales decline, the companies are still weighed down by large, expensive store bases even as the retailers need to invest in technology to fend off competition from new brands born online, like Lulus.
Forever 21 has more than 815 stores in U.S. and worldwide.
Teen clothing retailers have found themselves particularly vulnerable to the retail upheaval. A number of them have filed for bankruptcy over the past few years, including Aeropostale, Rue21 and American Apparel.
Last week, many apparel retailers turned in dismal earnings, which haven’t been this disappointing since the Great Recession. As a group, apparel retailers’ first-quarter results are down 24%, according to an analysis by Retail Metrics. The last time the group’s earnings were this bad was the first quarter of 2008, when they fell 40%, Retail Metrics said.
The person requested anonymity because the information is confidential. A Forever 21 spokeswoman told CNBC the company is “speaking with our lenders in the normal course of business and are in compliance with all of our agreements and continue to operate as usual.” Apollo declined to comment.
Bloomberg first reported the the restructuring exploration earlier Monday.
Date: June 06, 2019