Forever 21 Not Afraid of General Growth's Bankrutptcy

Forever 21 continues its fearless expansion push, a drive in the making for years now, with another bold move. The low-priced teen fashion chain is opening six large units in properties owned by bankrupt mall owner General Growth Properties.

Two of the stores are going into Houston-area malls, while one each will enter properties in San Antonio; Louisville, Ky.; Las Vegas; and Birmingham, Ala. Five of those six malls are on General Growth’s list of centers that are part of its bankruptcy filing, the most notable of them the Las Vegas asset, Fashion Show Mall.

The news here isn’t strictly that Forever 21 is expanding. The Los Angeles company, with nearly 500 stores, is growing exponentially every year. It’s most recent big splash was the acquisition, with Kohl’s, of 15 former Mervyn’s stores in California.

The buyout of Mervyn’s units was actually a tame compromise for Forever 21 executives. Initially, last year, the company put in a bid for for all of the former department-store chain’s 176 units but wasn’t successful.

What’s interesting is that Forever 21 chose General Growth malls as its latest expansion vehicle, especially five properties that are part of bankruptcy proceedings. After all, the Chicago-based landlord’s fate is far from settled, as the firm is now in the process of asking for extensions on its debt.

Additionally, it’s not as if entering these malls gives Forever 21 a foothold into new markets. Of these new stores, the only city in which it doesn’t have a presence is Birmingham, though it does have a store in its suburbs. It already has four of its concepts in Las Vegas proper. Plus, the six stores will average nearly 100,000 square feet each, much larger than Forever 21’s average footprints, which run at either 7,000 square feet or 20,000 square feet, though the retailer is known to go much larger occasionally.

The retail real estate community wouldn’t be insane to have slight misgivings about this rapid expansion rate. Not so long ago, discount sporting goods chain Steve & Barry’s swallowed up vacant locations in malls and soon went under.

To make matters a bit better, recent numbers show that despite its financial problems, General Growth’s centers are still performing well, with occupancy essentially flat at 90 percent in its second quarter from the same year-ago period. Plus, General Growth’s Fashion Show is still performing well. Hopefully Forever 21’s overall real estate plan takes that, and other factors, into account, so that these spaces won’t soon house empty storefronts instead of a busy retailer.