Forever 21 has filed for bankruptcy protection for the second time and plans to shut down its US operations as mall traffic declines and competition from online retailers like Amazon, Temu, and Shein intensifies.

F21 OpCo, which operates Forever 21 stores, announced Sunday that it will wind down its US business under Chapter 11 bankruptcy protection while exploring a potential partnership or asset sale.

"While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies," Chief Financial Officer Brad Sell said in a statement. He cited the de minimis tax exemption, which allows shipments valued under $800 to enter the US duty-free, as a factor that has put the company at a pricing disadvantage.

Forever 21’s US stores will hold liquidation sales, and its website will remain operational during the wind-down process. However, its international stores—operated by licensees—are not included in the bankruptcy and will continue business as usual.

Authentic Brands Group, which owns Forever 21’s international intellectual property, may license the brand to new operators. Jarrod Weber, Global President of Lifestyle at Authentic Brands Group, said the restructuring will help modernize Forever 21’s distribution model, positioning it to compete in the fast-fashion industry.

Forever 21 previously filed for bankruptcy in 2019. The following year, it was acquired by Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. In January 2024, its parent company, Sparc Group, merged with JCPenney to form Catalyst Brands, which also owns Aéropostale, Brooks Brothers, Eddie Bauer, Lucky Brand, and Nautica.

The bankruptcy comes amid a wave of retail closures, with companies such as Joann Inc., Party City, and Liberated Brands also seeking Chapter 11 protection in recent months due to declining consumer spending and rising operating costs.

Founded in 1984, Forever 21 gained popularity in the 1990s alongside H&M and Zara, attracting young shoppers with affordable fashion. However, the brand expanded aggressively just as consumers shifted online. Critics argue Forever 21 was slow to embrace e-commerce and struggled against competitors like Shein and Temu, which offer cheaper, trend-driven fashion.

Retail analyst Neil Saunders noted that Forever 21’s oversized stores and reliance on struggling malls contributed to its decline. "Forever 21 was always a retailer living on borrowed time," he said. "Both a weak apparel market and cheap Chinese marketplaces have eroded its standing."