Two notable bankruptcies are in the process of being filed – Sugarfina, Incorporated and Forever 21.
Sugarfina is a chain of high-end candy shops that opened in Beverly Hills in 2013. Its backers include Bono and Goldman Sacks Group. Forever 21 plans to file in Delaware on Sunday and to immediately begin shutting down some of its 700 stores. Forever 21 was founded in 1984 and operates in a number of countries, selling low-priced apparel to a range of shoppers – many of them distinctly over 21. The chain’s sales have slowed after a period of rapid growth that included the opening of giant stores in New York and Las Vegas (ref WSJ). The company has recently been in negotiations with landlords to renegotiate leases and shrink the size of some of the bigger spaces. Like many stores that have a strong presence in malls, Forever 21 has seen foot traffic fall off as consumers turn away from the bricks and mortar locations. The same situation is said to be true for Sugarfina. The company’s cofounders have said, “Like many retail brands, Sugarfina has been negatively impacted by a challenging retail environment, particularly in malls where many of our boutiques are located,” (ref WSJ). “After a careful review of available options, we determined that an organized restructuring of the company is in the best interests of all parties, including our valued customers, partners and employees.” The company has also said that considering the sale of the company is a possibility and has, to date, had a $13 million offer from the holding company Candy Cane LLC. Sugarfina, of course, has also been subject to the recent years’ consumer disapproval of products containing sugar – the recent bankruptcy filing of San Francisco-based Lolli and Pops Inc. is further evidence of the widespread swath cut by changes in consumer buying habits. Little is known at this time about details of the Forever 21 bankruptcy plans, other than the company’s most-senior lender, JPMorgan & Chase has agreed to roll over its loan to the retailer into a new bankruptcy financing package. The two companies have many of the elements that have tended to be the cause of bankruptcies in the past. Rapid growth is one of those, as is location problems (such as, relying on malls for foot traffic), as well as the inadvertent and dramatic changes in consumer tastes. Bankruptcies can sometimes be used to get companies back on their feet – let’s hope for the best with the latest round of bankruptcies.