Low-price fashion chain Forever 21, a once-hot destination for teen shoppers, will close all 44 of its Canadian stores and up to 178 locations in the United States while restructuring its global business under bankruptcy protection.
The Los Angeles-based company announced Sunday that it had filed for protection under U.S. and Canadian laws and confirmed Monday that it plans an "orderly wind-down" of the entire Canadian business.
"After years of poor performance and challenges set forth by the headwinds facing the retail industry today, our Canadian operations are simply no longer economically viable," said Bradley Sell, Forever 21 Canada's chief financial officer, in a statement.
The company considered "numerous options" before it came to the "difficult decision to discontinue operations in Canada," he said, adding it believes the choice to be the right one for Forever 21 Canada.
Forever 21 was granted protection under the Companies' Creditors Arrangement Act at the Ontario Superior Court of Justice in Toronto, the company said. PricewaterhouseCoopers Inc. will serve as its monitor in proceedings.
The retailer operates 44 stores in Canada, including two in Ottawa at the Rideau and Bayshore shopping centres. These stores, which employ about 2,000 people, will stay open during the liquidation process, the company said, but will close before the end of the year.
"We have plans to liquidate our store inventory in the near-term," the company said in an emailed statement.
"Canadian customers can continue to shop our curated assortment of merchandise on our U.S. website."
The company said it would focus on maximizing the value of its stores in the United States, where it had 500 locations prior to the downsizing.
Forever 21 will also close most of its locations in Asia and Europe but will continue operating in Mexico and Latin America.
The numbers show the crisis facing traditional retailers. So far this year, publicly traded U.S. retailers have announced they will close 8,558 stores and open 3,446, according to the global research firm Coresight Research. That compares with 5,844 closures and 3,258 openings in all of 2018.
Coresight estimates the store closures could number 12,000 by the end of 2019.
The Canadian retail scene has undergone similar trends but hasn't been an exact copy of the United States.
Payless ShoeSource closed its 248 Canadian stores after filing for bankruptcy in February. However, Toys R Us Canada continues to operate as a separate business despite the closure of its American and British counterparts.
Forever 21 was founded in 1984 and, along with other so-called fast fashion chains like H&M and Zara, rode a wave of popularity among young customers that took off in the mid-1990s.
Their popularity grew during the Great Recession, when shoppers sought fashion bargains.
But over the last year or so, fast fashion has fallen out of style. Young customers are losing interest in throw-away clothes and are more interested in buying eco-friendly products. They're also gravitating toward rental and online second-hand sites like Thredup, where they see clothes worn again instead of ending up in a landfill.
These trends are happening while discounters like Target have spruced up their fashion assortments, stealing away customers.
Forever 21 has also been more vulnerable than some other chains because of its large footprints in major malls, which are attracting fewer shoppers.