Party City, North America's largest party supply retailer, has declared its intention to close nearly 700 stores across the country, as it filed for Chapter 11 bankruptcy protection for the second time within two years. The announcement, made on December 21, 2023, marks the end of nearly 40 years of colorful celebrations associated with the chain, which has become synonymous with everything from birthday parties to Halloween costumes.
According to reports from CNN, Party City’s CEO Barry Litwin informed employees during a company call about the sobering decision to commence the wind-down process, with corporate employees officially concluding their roles by December 20. “It’s really important for you to know we’ve done everything possible to try to avoid this outcome. Unfortunately, it’s necessary to commence a wind-down process immediately,” Litwin stated during the call.
This closure follows Party City's emergence from bankruptcy earlier this year, having resolved approximately $1 billion of its $1.7 billion debt through restructuring meant to provide the company with breathing room. Despite this, challenging market conditions—marked by inflationary pressures and declining consumer spending—made the operational ability of the company unsustainable.
“The decision was made following exhaustive efforts by the company to find a path forward,” Party City stated, highlighting the mounting difficulties driven by increased costs and competition, particularly with rivals like Walmart and Target, alongside burgeoning occasion-based pop-up retailers such as Spirit Halloween.
Litwin, who joined the company as CEO only months prior, emphasized during the company call the obstacles faced, citing the combination of rising costs and reduced consumer interest as insurmountable challenges. “Unfortunately, the macroeconomic headwinds proved too severe for the company to overcome,” he said.
While Party City has employed around 16,500 workers, including 6,400 full-time employees, nearly all will not be offered severance pay. The company has pledged to retain more than 95% of its workforce to help with the winding down process, which is particularly relevant as the company seeks to maximize asset value for stakeholders. This is set against the backdrop of changing consumer habits and economic conditions prompting marked reductions across retail sectors.
The urgency of the liquidation process is underscored by the upcoming holiday season. “While we’ve been operating under immense pressure for quite some time, the timing of going-out-of-business sales coinciding with the holidays is unfortunate but will allow us to capture some benefit for all stakeholders,” said Deborah Rieger-Paganis, the company’s chief restructuring officer.
The Racine, Wisconsin store, for example, is set to close its doors officially by January 18, 2024. Everything is up for sale, with prices slashed considerably. The decision to wind down Party City's retail and wholesale operations signals not only the end of the brand as many have known it but also highlights the rapidly changing expectations of consumers who have turned to online shopping and discount retailers.
Many long-time customers expressed surprise and disappointment over the news. For years, Party City has been their go-to spot for festive supplies across various celebrations. The sentiment felt by consumers reflects their nostalgia for what the company represented over the decades. Perhaps more telling of its decline, between July 2023 and July 2024, comparative store sales plummeted nearly 9.5%, placing additional strain on the already beleaguered operations.
The scope of the closures and liquidation is extensive, impacting not only the party supply industry but also communities reliant on local employment and the economic contributions these stores provided. “We’ve been through so much to try to make this work, and today, it feels like we’re losing part of our culture,” lamented one loyal customer outside the Racine store, Mirroring reactions across the nation.
After filing for bankruptcy, Party City has enlisted Gordon Brothers, a global advisory, restructuring, and investment firm, to assist with the liquidation and sale processes. The company will work to manage its closing sales efficiently, providing consumers with steep discounts as it seeks to exit the retail scene entirely.
Despite the bankruptcy fillings and challenges, analysts have noted the significance of the party supply niche, emphasizing the chance for other retailers to step in and fill the gap left by Party City's departure. Industry experts contend the market will still promote commemoratory gatherings, albeit through different avenues. “If anything, the void left by Party City may present opportunities for nimble competitors or even local businesses to cater to these needs,” noted industry analyst Neil Saunders.
Party City’s downfall epitomizes the struggles of traditional brick-and-mortar retailers contending with dramatic shifts and pressures within the retail environment. It stands as a painful reminder of changing shopping habits and the necessity for adaptability within retail sectors to survive.
For now, consumers anxious for party supplies will have to look elsewhere, as Party City prepares to close its doors for the final time, ending nearly four decades of service dedicated to bringing joy and celebration across the nation.
