Forever 21 Is Closing More Stores as Reports of Bankruptcy Bubble Up

The fast fashion company is said to be is said to be “shifting toward a digital-first model,” a source tells PEOPLE

It’s the end of an era for Forever 21.

The fast fashion brand, which was created by South Korean husband and wife team Do Won Chang and Jin Sook Chang in 1984, is set to close as many as 200 stores as rumors that the company may file for bankruptcy swirl.

A source tells PEOPLE that if a Chapter 11 restructuring is filed it would only affect “Forever 21’s U.S. operating company, which manages the brand’s stores and day-to-day retail operations in the U.S.” They added that the goal of filing “would be realigning operations” in order to better position the company for “long-term success.”

The company’s global business would not be affected by any potential filing.

Local outlets in New York, California, Pennsylvania, Connecticut and Washington have confirmed multiple stores in their states are set to be closed. While an exact number of closures has yet to be confirmed, local New York outlet Syracuse.com reported that at least 200 stores may be affected.

Additionally, Worker Adjustment and Retraining Notification (WARN) notices have been filed in California and Pennsylvania indicating mass layoffs will be affecting employees in those areas, multiple outlets, including USA Today, confirm. Those layoffs are set to include at least 350 workers at the company’s headquarters in Los Angeles, which is also reportedly slated to be closed.

“This decision was not made lightly,” a Forever 21 spokesperson said in a statement to USA Today in February. “And we remain committed to transparency and fair treatment of our employees during this period of transition.”

PEOPLE reached out to representatives for Forever 21 and Authentic Brand Groups for comment on the bankruptcy reports.

Forever 21 was previously purchased out of bankruptcy by Authentic Brands Group, Simon Property Group and Brookfield Property Partners for $300 million in February 2020. According to USA Today, Authentic Brands chief executive Jamie Salter previously said during a 2023 conference that purchasing Forever 21 was “probably the biggest mistake I made.”

Sources tell PEOPLE the brand will not be disappearing. Instead, it is anticipated to be moving toward a more online-centric model to better compete with fast-fashion juggernauts like Shein and Temu, eliminating many of its storefronts in the process.

“Forever 21’s U.S. business is said to be shifting toward a digital-first model, supported by a streamlined retail footprint focused on approximately 100 top-performing stores,” they say.

Forever 21 was a staple in malls across the country throughout the ’90s and early ’00s, making it a popular shop for teens. However, the company has struggled to compete in an era where shopping is increasingly done online, especially among younger consumers.

PEOPLE’s source says the company’s proposed new approach will “enable the brand to respond faster to trends and deliver curated monthly collections based on consumer insights” — and potentially reconnect with its target customers in the process.