Forever 21 is filing for bankruptcy. What does that actually mean?

Forever 21 is filing for bankruptcy, the company announced Sunday night. The fast-fashion retailer — which operates around 800 stores worldwide with more than $3 billion in estimated annual sales — had faced months-long speculation about its plan to pursue a Chapter 11 filing. The company was reportedly in talks with advisers and lenders to restructure its debt in June. It will reportedly close up to 178 stores in the US and up to 350 overall, according to the New York Times, and cease operations in 40 countries.

Forever 21 said it’s planning a global restructuring strategy and has obtained $350 million in financing.

“This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” said Linda Chang, the company’s executive vice president, in a press release.

The days of Forever 21, with its strong brick-and-mortar presence, have been numbered, thanks to the “retail apocalypse,” a threatening term used to describe how the internet changed consumers’ shopping habits, particularly affecting chain stores.

Since 2017, decades-old American businesses like Sears, Toys R Us, Mattress Firm, and Payless have filed for bankruptcy, a signal of how much these once-prosperous brands are struggling to keep up with shoppers. Most of these retailers are also owned by private equity firms which, as Forbes reports, use leveraged buyouts to purchase companies. These buyouts burden retailers with high debt and interest that they later have to pay, making them less profitable.

It doesn’t stop there: Inexpensive fashion-forward stores that teens once gravitated to — like Claire’s, Charlotte Russe, and PacSun — have found themselves in bankruptcy court. Forever 21, once a go-to shopping destination for cheap cool-girl looks, is now on that growing list.

Still, a Chapter 11 filing wouldn’t necessarily lead to the death of Forever 21, at least not yet. As Eliza Brooke has written for Vox, bankruptcy offers an opportunity for a company to restructure while continuing to operate, suspend, or reconfigure debt payment. Think of it as a corporate reset button, dating to the 19th century. Companies realized that it made sense to keep dying businesses running to still make money, rather than completely shutting them down and destroying their economic value, Fordham University law professor Richard Squire previously told Vox.

For all we know, Forever 21 could follow Toys R Us’s footsteps after its 2017 bankruptcy. The toy retailer, once known for its plentiful racks of games and gadgets, has emerged from the ashes: It’s rebranding new stores as “highly interactive” play environments and preparing to open in Texas and New Jersey in November.

Forever 21’s bright multi-story storefronts — a way to appeal to shoppers in packed malls — could have exacerbated its problems with declining foot traffic, a retail expert told the Los Angeles Times. The retailer is known for its excess in both clothes and space, operating massive thousand-square-foot stores in hubs like Times Square and Las Vegas.

Bloomberg reported that the retailer had been in talks with retail property landlords Simon and Brookfield over a pre-bankruptcy deal, but plans fell through shortly before the Chapter 11 filing. As Forever 21 prepares to close its smaller, less successful stores during the restructuring, landlords will have another problem: finding a way to fill those spots as mall vacancy rates are on the rise.

But there’s still a glimmer of hope for mall brands, according to a study by the International Council of Shopping Centers: Around 75 percent of Generation Z consumers think shopping in physical stores offers a better experience than online, and more than half think it’s important that a retailer has a physical store nearby.

In a surprising twist, Gen Z might be malls’ saving grace, but “more traditional retailers haven’t really thought about [them] as an attractive target,” a retail analyst told Bloomberg. Forever 21 was once praised for winning over the young millennial crowd with its social media strategy; however, Gen Z shoppers may be more swayed by products they see on YouTube and Instagram via influencer content.

Forever 21 has more than 16 million Instagram followers but doesn’t heavily rely on influencer marketing to target audiences. And in recent years, a crop of fast fashion e-commerce hubs, like Fashion Nova, ASOS, and Missguided, are competing to be the “new Forever 21,” boasting cheap prices, trendy styles, and aggressive social media campaigns.

The chain’s lack of an obvious fashion identity previously helped it stay ahead of shuttering competitors in 2015, Racked reported. Its bountiful selection helped it appeal to a range of customers: “They don’t brand themselves with any specific type of style, saying it’s edgy or preppy,” new media consultant Rachel Kane told Racked. That’s the retailer’s goal and ultimately its brand — staying forever relevant in the world of fashionable 20-year-olds. The bankruptcy filing doesn’t seem to be its end; it could mean more time to plan for a second chance at forever.

Sign up for The Goods’ newsletter. Twice a week, we’ll send you the best Goods stories exploring what we buy, why we buy it, and why it matters.