Dive Brief:

• Privately owned fast-fashion retailer Forever 21 is having trouble paying its bills and isn’t clearly communicating with vendors or lenders, sources told the New York Post. “We are unable to get timely financial disclosures from the company,” said Gary Wassner, CEO of Hilldun, a New York retail lender that recently pulled its credit lines for Forever 21.

• Last year reports said Forever 21 would ease up on its swift and massive expansion while seeking to re-negotiate some leases for smaller spaces and closing two of its biggest stores in California. The retailer at that time was also working to secure a $150 million loan.

• Experts say Forever 21's massive expansion and its 2014 move to create an even lower-priced brand, F21 Red, have hobbled its financial stability. Forever 21 did not respond to the New York Post's requests for comment.

Dive Insight:

For a while, fast-fashion—with its bottom-barrel prices and swift-moving styles—seemed to be the only apparel category experiencing success with today’s fickle young consumer. It’s not clear whether the situation Forever 21 finds itself in now is really a sign that trend is over (the company looks to have overextended itself), but there are apparently limits to its appeal.

At the same time, other teen retailers, notably Abercrombie & Fitch and American Eagle Outfitters—those that fast-fashion brands like Forever 21 and rival H&M have in recent years left in the dust—are actually showing signs of new life after scaling back their inventories and, most importantly of all, changing up their merchandise. 

Forever 21 is a privately held company—the Korean-American family that began the chain with a single Los Angeles store remains in charge—so hard numbers on its finances aren’t easy to come by. But RBC Capital Markets retail analyst Brian Tunick told the Post “After having a great five- to 10-year run, they probably don’t have the cash flow they had before when they were the ones taking market share … [O]ur contacts in the channel have estimated that they’ve had negative same-store sales for the past several years.”

Experts say Forever 21's biggest misstep may have been failing to change up its merchandising in response to evolving tastes, even as it aggressively expanded.

“Like many teen retailers, they were drinking too much of their own Kool-Aid and overexpanded the store fleet both in terms of units and square feet—with new stores averaging over 35,000 square feet and some stores over 100,000 square feet,” Customer Growth Partners president Craig Johnson told the Post.