American fashion chain Forever 21 is considering downsizing its largest stores as it is struggling to make a profit on its largest floor spaces.
Large stores a company feature
Forever 21 has 720 stores worldwide, averaging 3,530 sqm, with the largest even reaching 15,050 sqm. The American chain has always focused on teens, but the average price of cheap teenage clothing has steadily dropped over the past few years which is making it harder to turn a profit. The fact that large store spaces are very expensive in American cities does not help.
For this fiscal year, Forever 21 is expecting a 4.7 billion dollar (4.2 billion euro) turnover, with 8 billion dollars (7.1 billion euro) as a target for 2017. To achieve that, it will have to open hundreds of new stores all across the globe, located at important shopping streets.
According to The Wall Street Journal, the company is facing problems ahead: after years of unparalleled growth, sales have apparently slowed over the past year, even dropped on a like-for-like basis. That means that growth has only been created through the opening of additional stores, nothing else. Apparently, an increasing number of younger people are turning their backs to the larger chains as they crave more unique items.
The company is also in talks with business bank Wells Fargo and TPG Capital, to acquire a 150 million dollar (133 million euro) loan. That money would be used to open additional stores in South America, but would also be used to terminate several rental agreements for onerous European stores, an area where the crisis has also hit Forever 21.