Party City Files For Bankruptcy to Find ‘Stronger Footing’

Party City is seeking bankruptcy protection, the latest casualty of consumer cutbacks on non-essential spending.

The party supply retailer announced the decision to file for Chapter 11 protection Tuesday (Jan. 17), saying its subsidiaries outside the U.S., its Party City franchise stores, and Anagram — its foil balloon business — are not part of the proceedings.

CEO Brad Weston framed the move as an effort to get the company “on stronger financial footing” and “continue to innovate and elevate the customer experience,” according to a company news release.

Those customers were “facing significant inflationary pressures” last year, as PYMNTS reported following the release of Party City’s most recent earnings report.

The company, which has 825 stores, had hoped to save $30 million this year, in part by a 19% reduction in staff achieved through a mix of layoffs and leaving vacant positions open.

The same report showed that while the company’s Halloween sales were up year over year, they were still at the lower end of its expectations “as macro pressures impacted customers’ ability and willingness to increase spend on Halloween celebrations,” Weston said.

“Looking ahead, we anticipate the current macro backdrop to persist and are taking action to best position the business in this environment and for the longer term,” Weston added.

Party City’s customers’ reluctance to shop for Halloween items was in keeping with research by PYMNTS showing that continued high inflation has forced consumers to reduce their purchases of non-essential products.

Shoppers are forgoing purchases of things like toys, games, electronics, and appliances in favor of core items like food, rent/mortgage payments, and keeping the lights on.

To keep its own lights on, Party City said it had secured $150 million in financing from an ad hoc group of holders of more than 70% of its senior secured first lien notes. The $40 million mark cap company has seen its stock fall 93% in the last year. It was trading at 35 cents Wednesday morning.

The company says it will also continue the initiatives it had underway, including “the further conversion of Party City stores to next-generation prototypes” and “evolving its Halloween City pop-up stores,” the release said.

Last year, Party City said its commitment to providing a better in-store customer experience had helped drive sales and pledged to spend 2022 enhancing customer engagement.

News of the company’s bankruptcy filing comes as other retailers find themselves in similar positions. Last week saw beauty brands builder Forma announce it was seeking bankruptcy protection for itself and its domestic subsidiaries.

And Bed Bath & Beyond, which earlier this month said it was considering bankruptcy, is also reportedly looking to sell off its assets.

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