Forever 21's exclusive shipper EZ Worldwide exited Chapter 11 with Disney and Amazon

EZ Worldwide Express served as Forever 21's main shipping source to 171 stores. As the retailer's shipping business slowed, the relationship turned unprofitable: EZ's revenue fell from a high of $780,730 to a low of $352,483 within a single year, and the shipper cut staff, warehouses and transport trucks before filing for Chapter 11 bankruptcy protection, eventually retaining just 34 Forever 21 locations.

In December 2016, a US Bankruptcy Court ruled that the newly reorganized shipper was free to enact its debt-repayment plan. The plan no longer rested on a single vendor: EZ now works with Disney, H&M and Amazon, while keeping shipments to 34 Forever 21 locations under something of the old contract. Creditors are to receive approximately $400,000 in four annual payments plus a portion of profits if the shipper earns more than $35 million per year.

The episode became a lesson in single-client dependency. An exclusive contract guarantees income only while the client's volume holds, and entering bankruptcy to break out of one is a costly way to renegotiate; good contracting, the analysis noted, would have included a safety clause placing certain volume responsibility on Forever 21.

A court-approved plan repays creditors about $400,000 in four annual payments, plus a share of profits once the shipper earns more than $35 million a year.

An exclusive contract with one retailer concentrated all of EZ's revenue risk on Forever 21's store traffic.

Forever 21's slowing business drove EZ's revenue from $780,730 to $352,483 within a year, leaving scale it could not cover.

Cutting staff, warehouses and trucks could not close the gap, so EZ reorganized under Chapter 11 protection.

Emerging with Disney, H&M and Amazon as customers replaced the lost volume with a diversified client base.

An exclusive anchor contract concentrates all risk on one client's fortunes; volume floors or a second client base are the insurance a supplier must buy.

The shipper emerged from bankruptcy protection with its repayment plan in force, keeping the 34-store Forever 21 remnant of the old contract while Disney, H&M and Amazon provide the profit that repays creditors. Forever 21 weathered the storm despite reports it was struggling to pay its bills; EZ Worldwide required legal intervention but came out with its creditor plan approved.