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January 9 2018 2:30 AM
US fashion giant Forever 21 has made a €44m bet on Dublin - and lost.
The chain is imminently set to pull the plug on its only outlet in Ireland, with spiralling losses having prompted the decision to close its doors here.
Newly-filed accounts for Forever 21 Fashion Ireland Ltd show that the company has set aside almost €11m related to planned redundancy and lease exit costs at its Irish store, which was its first in Europe in 2010.
Forever 21 invested more than €10m alone fitting out the Dublin store.
The projected store closure costs have been combined with a €4.5m loss in the financial year ended February 2016, resulting in accumulated losses at the firm hitting €44m at the end of that period.
The €4.5m operating loss in the 2016 financial year was significantly less than the almost €8.3m the store lost the previous financial year, however.
Rumours swirled before Christmas that Forever 21 was set to close its Dublin store, which is located in the Jervis Centre near the capital's O'Connell Street.
The Jervis Centre is owned by Paddy McKillen and Padraig Drayne. The Forever 21 2016 accounts note: "As part of an overall strategic review of the group's operations in Ireland, a decision has been taken by the board, subsequent to the year end, to cease operations and close its only store operating in Ireland."
As of yesterday, staff at the store had not been given a formal date for the closure, however.
But the company has already agreed to a lease termination. It's believed Forever 21 Fashion Ireland was paying rent of about €2.75m a year for its premises.
The Jervis Centre generates total annual rent of about €16m a year, which was touted to hit €18.5m within a year.
The Forever 21 accounts also show that a total of €13.3m was set aside to fund the closure of the Dublin outlet.
But the release of €2.3m lease incentives reduced that closure cost figure to just under €11m.
Forever 21 Fashion Ireland said that the costs associated with the decision to cease operations in Dublin include projected operating losses until the outlet closes, redundancy costs, professional fees and onerous lease charges.
The disastrous foray into Ireland by Los Angeles-headquartered Forever 21 may curb any near-term ambition to open an alternative outlet here.
Sales at the Irish outlet slipped to €9.9m in the 12 months to the end of February 2016, from €10.4m a year earlier. Its administrative expenses were sharply cut, from €12.2m to €7.7m.
Since it opened its first European outlet in Dublin, it has gone on to launch stores in countries including the UK, Germany, Spain, France and Poland.
The chain, founded in the United States by Korean immigrants Kin Sook Chang and his wife Jin Sook in 1984, generated global sales of about $4bn (€3.3bn) in 2016.
It operates up to 800 stores worldwide. Mr Sook Chang's daughter Linda is a director of Forever 21 Fashion Ireland.
The Dublin outlet was opened to huge fanfare, and promised to employ as many as 250 full and part-time staff.
By the end of February 2013, the number of staff at the store had fallen to 147 from 216 a year earlier.
At the end of February 2016, the figure was just 82.