Forever 21 seeks smaller formats, loan

Fast-fashion retailer Forever 21 is in talks to obtain a $150 million loan from Wells Fargo and TPG. The fast-growing chain is in rapid expansion mode, but is looking to build smaller format stores.

The privately held company is profitable, but has struggled recently with a slowdown in European sales at larger stores, The Wall Street Journal reported. Forever 21 is expecting sales to rise 10 percent in 2015 to $4.7 billion. Profits are finally tapering off after years of growth.

Many teen retailers have seen financial troubles in the past few years as they compete in the world of inexpensive, fast-fashion retailers such as H&M. Sales have dropped for Abercrombie & Fitch and American Eagle Outfitters. Some brands, such as Wet Seal and Delia's, had to file for bankruptcy.

Forever 21 recently launched F21 Red, which offers less expensive items than the flagship brand. In addition, the company has expanded into plus sizes, all in attempt to reach more customers.

Location size seems to be a problem as large formats can't make the sales needed to create productivity. For example, some of the largest stores are the 90,000 sq. ft. store in New York, the 94,000 sq. ft. location in San Bernadino, California, and a 127,000 sq. ft. store in Las Vegas. The company is talking about downsizing some of these bigger locations.

Up until now, Forever 21 has had to take on little debt to fund expansion.

For more:
-See this article from The Wall Street Journal

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