Forever 21 + Mervyn's?

The L.A.-based retailer is bidding to buy 150 of Mervyn's 176 stores, reports California Apparel News. The move comes as the Hayward-based department store chain, now in bankruptcy protection, plans to close 26 locations. It's an interesting effort for Forever 21, which generally has stores much smaller than a typical Mervyn's. But the retailer is moving beyond that mall-based model – as an example, it converted an old Saks Fifth Avenue in Pasadena into a Forever 21 flagship. And according to the Apparel News story, it has plenty of cash.

“If they can get this at a great price, if they have the capital to do it and it doesn’t cause any pain, it could be a wise move,” said Liz Pierce, a retail analyst at Roth Capital Partners in Newport Beach, Calif. “And then I could make the argument of, ‘Whoa, really?’ I don’t know their return on investment on those big-box stores versus their smaller stores. And then there is the elephant in the room with the economy.” However, this could also be prime time to buy real estate, as prices are slipping from their highs in 2006. “Real estate is low right now. If you can get it at the right price, it is probably not a bad move at this juncture,” said Jeffrey Van Sinderen, a retail analyst at B. Riley & Co.’s Los Angeles office. “It diversifies their footprint. It’s an interesting idea.”


The retail chain has been one of the fastest-growing, privately owned businesses in Los Angeles. Along with expanding the size of its stores, Forever 21 is going international. On Oct. 9, the company opens its first retail concern in South Korea. It is a 25,000-square-foot store in the Myung-Dong district of Seoul, South Korea, near the presidential palace and the U.S. Embassy. On Oct. 10, a franchisee is opening a large Forever 21 store in Bangkok, Thailand, in the CenterWorld shopping center. Forever 21 is also scouting locations for a flagship store in Shanghai.

If Forever 21 gets the stores, it would end up selling off a number of them.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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