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Forever 21 wants to downsize some megastores to boost growth

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Forever 21 is looking at downsizing some of its biggest stores and has already spoken to mall landlords about it, according to a report.

But big is beautiful when it comes to financing. The fast-growing teen apparel giant is also in talks for a $150m loan to boost its expansion plans. The news on both moves was reported by the Wall Street Journal with the newspaper citing sources close to the company.

An RBC analyst told WSJ Forever 21 has grown its US apparel share from 3% in 2003 to 10% today, the fastest growth of any retailer in the country.

The company has predicted a 10% sales increase this year to $4.7bn but analysts said growth is slowing after those years of fast expansion and that it’s finding it harder to generate strong sales per square foot from some of its giant-sized stores with its very low prices.

The RBC analyst told WSJ womenswear prices have fallen 13% since 2000, according to figures he compiled from Euromonitor and RBC itself. In women’s tops, a key category for Forever 21, prices have fallen even faster – by 23%.

And with Forever 21 targeting a wider shopper base through its new even-lower-priced F21 Red chain, price pressures will remain.

The company’s extra-large stores include a 90,000sq ft site in Times Square, NYC, and a 127,000 site in Las vegas.

WSJ said Forever 21 is talking to malls owner Simon Property Group about cutting back its 100,000 sq ft store in the Tacoma Mall in Tacoma, Washington.

But that doesn’t mean expansion isn’t a key focus. It has 720 stores and plans for another 100 this year with new stores in South America, although Europe could also see some downsizing.

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