Vaeshnavi Kasthuril
Chennai, 23 August
Forever 21, a fast fashion brand of Aditya Birla Fashion and Retail (ABFRL), is closing stores across India due to unsold inventory and stagnant growth over the past five years.
A senior employee, who did not want to be named, said ABFRL might consider selling the franchise rights to another entity or exit the Indian market. Forever 21 has not performed as a Cash Generating Unit (CGU) for ABFRL over 2019-2024, as per the annual reports.
A cash-generating unit (CGU) is a business segment that generates cash independently of other assets or group of assets. The brand’s growth rate of 17.8% is also below the industry average of 30- 40%, said an analyst from Motilal Oswal, who did not want to be named.
Janet Arole, the official spokesperson of ABFRL, declined to comment on the issue. A store manager at a Forever 21 outlet in Chennai said investors are reluctant to provide funding due to unsold stock and the brand’s ongoing financial difficulties. “Stores have unsold clothing from 2018, and despite attempts to clear out stock through sales and discounts, the brand has been unable to generate significant revenue”, he said, on condition of anonymity.
The Chennai outlets, which typically generate approximately Rs 60 lakh per month, have recently reported only Rs 30 lakh in revenue. The store also has a surplus of new inventory worth Rs 50 lakh, he said. ABFRL acquired the franchise rights for Forever 21 from Diana Retail Pvt Ltd in 2016 for Rs 176 crore, with the aim to strengthen its presence in the women’s western wear segment.
The brand, however, has not met expectations. ABFRL expanded the brand from 21 to 40 locations in seven years. The company has closed three stores and is about to shut 8-10 more stores in northern India, according to the store manager.
The fast fashion industry in India is facing challenges, with brands like Zudio gaining popularity over traditional fast fashion giants such as Zara, H&M, and Forever 21. An analyst from Motilal Oswal said fast fashion has struggled to maintain customer loyalty as consumers often prefer value-for-money options and switch brands frequently.