Dive Brief:

• Forever 21 filed for bankruptcy on Sunday and said in court papers it aims to close as many as 178 U.S. stores in order to resize its operations. The fast-fashion retailer said in a press release that it plans to exit most of its international stores in Europe and Asia while Forever 21's chief restructuring officer said the company plans to refocus around its U.S. and Latin American business, according to another filing.

• The company has obtained $275 million in financing from existing lenders with JPMorgan Chase Bank as agent, plus $75 million in new capital from investment firm TPG Sixth Street Partners, according to the release. The company has $227.7 million in total funded debt, according to another filing.

• In order to protect its holiday prospects, the company, ahead of its Chapter 11 petition, forged new agreements with more than 100 vendors, "representing over 80 percent of outstanding vendor prepetition payables," to receive goods on equal or better terms than they had previously. More than 75% of the retailer's more than $300 million of goods will be delivered in coming months, according to the filing.

Dive Insight:

The fourth quarter isn't the season for bankruptcy.

Just ask Toys R Us, whose all-important holiday sales were doomed as it ran into trouble with vendors ahead of its own late-2017 Chapter 11 filing.

Forever 21 in its paperwork addressed that, asserting that its seasonal pipeline was secure. "Forever 21 was able to calm key vendors regarding its ability to continue to make payments after a chapter 11 filing to minimize supply chain disruption heading into the critical 2019 holiday season," the company said. "While there is still much work to be done, unlike nearly every other retailer who finds itself filing for chapter 11 during the fourth quarter, Forever 21 has, to date, not experienced a flood of cash-on-delivery demands or shipping freezes."

On Sunday, the retailer also said that, with a fresh infusion of capital, it "intends to operate in a business as usual manner, honoring all Company policies, including gift cards, returns, exchanges, reimbursement and sale purchases."

Bigger picture, the fast-fashion retailer is effectively abandoning its expansion into Europe and Asia and shrinking its footprint at home, saying it will focus on e-commerce and its operations in Latin America and at home. Smart on both counts, according to GlobalData Retail Managing Director Neil Saunders. "This is for the best as Forever 21 was a weak player in a very competitive and sophisticated European apparel market; and it never really fully understood customer demand in the region," he wrote in emailed comments.

Its business in Canada, Europe and Asia has lost some $10 million per month on average over the past 12 months, the company said. Of its 251 international stores, its non-debtor affiliates own and operate 181 stores, while 54 are franchises and 16 are joint ventures. 

Meanwhile, the retailer has a sprawling U.S. footprint, with 534 stores across 46 states, plus Guam and Puerto Rico, in "lifestyle centers, shopping malls, street level shops, and outlets," and aggregate annual occupancy costs of some $450 million, the company said. Four landlords hold almost half of its leases, and, while negotiations are "productive" and ongoing, there's no resolution yet, according to its filing.

But malls emerged as the company's biggest headache, at least in the U.S. "A number of factors, both macro and micro contributed to the need to commence these chapter 11 cases," the company said. "Most significantly is the decrease in mall traffic."

That's true, Saunders said. But the retailer has also neglected its stores and failed to keep up with its customer, he warned. "Ultimately ... slimming down the operation and reducing costs is only one part of the battle," he said. "The long-term survival of Forever 21 relies on the chain creating a sustainable and differentiated brand. This is something that will be very difficult to accomplish in a crowded and competitive sector."