Forever 21 Slows Down Ambitious Growth Plans, Asks For $150M Loan
Amid a string of new openings, fashion retailer Forever 21 could be slowing its roll as the 720-store chain entered talks with landlords about downsizing its latest stores. While growth has been strong overall—the chain expects a 10% increase this year to $4.7B—the teen retailer reportedly has had trouble turning a profit in its new stores, producing negative sales over the past 12 months, one analyst said. In addition to the cost-cutting measure, Forever 21 is looking for a $150M loan from Wells Fargo and TPG to help spruce up the balance sheet. The loan may go to opening more stores in South America or buying out floundering European locations. Forever 21 has fueled most of its growth to date with little debt, using only cash flow and a Wells Fargo credit line, sources say. Forever 21 is usually hush-hush about its finances, but rumors have slipped that sales could be dwindling down due to changing tastes and frugal shoppers. Other retailers are facing similar woes as Abercrombie & Fitch and Wet Seal produced brutal results during Q1 2015. Despite experimenting with new clothing lines, the retailer is struggling to make its spacious stores—we're talking a 94k SF store in San Francisco and a 127k SF store in Las Vegas—keep pace with overall growth. [WSJ]
