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Forever 21’s Path From Bankruptcy Through COVID-19
March 10, 2021
Forever 21 was just turning back on when the world turned off.
And Daniel Kulle, who ended a 25-year run at H&M to become chief executive officer at Forever 21 in February 2020, found himself not just steering the company out of bankruptcy, but through the coronavirus crisis.
A year later, the fast-fashion retailer has a new lease on life, a more modern approach to customers and its first new store at the Cross County Mall in Yonkers, N.Y.
It was a transformative year, not an easy one.
It all started with a jolt for Kulle, who oversaw H&M’s march across North America, growing sales to $4 billion from $1 billion by opening 600 stores and developing integrated e-commerce platforms.
David Simon, CEO of mall giant Simon Property Group — which together with Authentic Brands Group and Brookfield Property Partners bought Forever 21 out of bankruptcy — approached Kulle about taking the top job at the Los Angeles-based retailer.
“I resigned on a Friday, flew out to L.A. on a Monday and started at Forever 21 on Tuesday, the 25th [of February 2020],” Kulle said in an interview on his whirlwind stint at the company so far.
The retailer he walked into was already beaten down and in serious flux.
Founded by Do Won Chang and his wife Jin Sook in 1994, Forever 21 grew quickly by serving up both trendy fashions and low prices, but ultimately pushed too hard with an aggressive international expansion that became too much for its quick-turn supply chain. (The international business is now being handled by licensing specialist ABG).
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Forever 21’s nearly five-month trip through bankruptcy, which started in September 2019, saw its office staff reduced to 450 people from 900 while the store base was trimmed to 410 from 550.
When Kulle arrived to start rebuilding, he was also facing vendors who were wary after the crunch that led up to the bankruptcy and then the stint stuck in court proceedings.
“When I walked in, the whole c-level walked out because the Chang family was the c-level,” Kulle said.
The plan was to reset the relationships with vendors and then tackle the rest, from real estate to store operations and setting up a new warehouse.
He didn’t have long to make it happen.
“Four weeks down the road, all stores closed at the end of March,” Kulle said, recalling the first and nearly complete retail shutdown of the pandemic. “That kind of curveball, you don’t need at that time.”
Forever 21 suffered many of the same woes that other retailers did as they struggled through the unprecedented situation. The retailer was forced to close stores and then furloughed its associates while contending with banks and finding that its asset-backed loan was supported by inventory stuck in stores.
Kulle laid off another 150 people from the office staff “to keep the lights on.”
It was a period that brought down more than a few retailers already struggling under heavy debt loads, including J.C. Penney, J. Crew, Neiman Marcus and more.
But Forever 21 had already taken its cuts in bankruptcy and Kulle said that helped the company pull through. (Apparently, he had plenty of opportunities to sharpen his motivational speaking chops).
“We went out and made a deal with our vendors saying, ‘This is our plan. You have to trust. You have to believe in us. We’re going to stay open.’”
When the staff would lose faith, the CEO kept them at it.
“I said: ‘Stick with me. Bear with me. We’re going to come through this one. We have to hold hands,’” Kulle said. “And we got enough liquidity that we could pay our vendors, could pay our rents, could pay our salaries — just grinding, grinding, coming through that whole thing.
“We had no choice,” he said. “Get in the lifeboat and everybody row in the same direction and do it damned quick because we are going under [if not]. You get aligned very quickly when you’re in the lifeboat.”
Forever 21 has many larger stores with their own entrances at malls, which helped keep business moving and Kulle pushed the business to become “consumer obsessed.”
With so much crisis and so many forced changes coming all at once, Kulle took the opportunity to bring other kinds of change to Forever 21, modernizing the business and giving it a new voice for a new age.
Kulle described it as a process to: “Find the right products, keep the fashion, solve the suppliers’ [worries] so they are with us, not against us, change the narrative about the company. Tell the story — we are alive. We are open, we have new fashion. So many people think you’re bankrupt, you have to change the narrative.”
After canceling orders in spring, Forever 21 came back with new looks for the back to school season. “Our store looked fresh quicker,” Kulle said.
And there’s been a new look in the stores as well, with more on the way.
Over the holiday season, the retailer marked 1 million pieces with tags noting a purchase would also lead to a donation for the Boys and Girls Club, ultimately leading to a $1.2 million charitable donation. (The company had campaigns tied to Black History Month and Women’s History Month as well.)
That’s an approach that is common in retail, but new for Forever 21 and Kulle said shoppers embraced the switch. Similarly, the company is pushing sustainability in new ways, launching a program to use organic cotton in every basic look at the end of this month.
The low prices are still there — think $3.99 for a basic cami — but Kulle said he’s sprinkling in higher-end goods as well, like hoodies for $99.99.
Men’s, active and lounge are also categories that are being focused on or relaunched.
And digital and brick-and-mortar are working closely together.
“You talk to the customer through e-commerce and then they convert through the store or they convert in the e-commerce,” Kulle said. “You have to build that complete omni experience.”
All of that brings Forever 21, which was always something of a quirky competitor in the fashion retail scene, much more in line with the broader industry trends.
Now the company is in a better place and moving forward with the 24,440-square-foot store in Yonkers, number 411 nationwide, with more than 60 associates.
A small step on its own, but after bankruptcy and the pandemic, a new store marks a big step back — for Kulle and Forever 21.
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