Forever 21 Wants Mervyns' Real Estate

This is interesting. Forever 21, unlike many other retailers, seems to be in a strong position with wealthy sales and a pile of cash to invest. Even more interesting is the fact that it wants to open big box locations as opposed to its more traditional smaller stores. As a result, it's apparently going to make a play to get Mervyns' locations so it can quickly roll-out its larger concept across the country.

Weeks after the mid-tier department-store chain filed for Chapter 11 bankruptcy protection, Forever 21 is bidding to buy 150 of Mervyns' stores.

If successful in its purchase, Forever 21 would decide which stores to sell and which to keep open to expand the Los Angeles company's growing retail empire.

“We have been looking at this kind of asset for years,” said Christopher Lee, senior vice president for Forever 21, whose array of fashionable apparel for young women and men is sold at bargain-basement prices.

Lee said the company recently submitted a bid to Miller Buckfire & Co., the New York financial adviser helping Mervyns with its bankruptcy, to buy 150 of the troubled company's 176 stores. Mervyns, based in Hayward, Calif., is closing the other 26 stores. “We are the stalking horse,” said Lee, referring to the term that defines the first bidder in a bankruptcy proceeding. “We've submitted our proposal, and we are waiting.”


Most of Forever 21's stores range from 10,000 to 20,000 square feet and are located in malls. But in mid-2006, Forever 21 launched its first department store–style outlet, which was much larger than the company's traditional specialty stores crammed with merchandise. It converted an old Saks Fifth Avenue emporium encompassing 40,000 square feet in Pasadena, Calif., into a Forever 21 flagship store. It is packed with elegant touches, such as the marble-tiled floor, sweeping curved stairway to the second floor and chandeliers.

Forever 21's goal has been to open more big-box concepts to keep its annual sales volume growing at a healthy clip. In 2007, sales revenues reached $1.3 billion. This year, they are expected to top $1.8 billion, Lee said.


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