Party City Holdco Inc. has officially declared bankruptcy for the second time within two years, announcing the impending closure of all its approximately 850 stores across the United States after nearly 40 years of operation. The New Jersey-based party supplies retailer's announcement came on December 15, 2023, as the company struggles with longstanding financial challenges aggravated by rising inflation and reduced consumer spending.
CEO Barry Litwin made the heartbreaking announcement to corporate employees during a video conference call. "That is without question the most difficult message that's I've ever had to deliver," he stated, as he confirmed the immediate winding down of operations. Employees were informed they would receive no severance and their benefits would cease immediately upon the closure.
The company had avoided immediate closure since filing for Chapter 11 bankruptcy back in January 2023. It emerged from bankruptcy just last October, having erased nearly $1 billion of its debt. Nonetheless, it was still left burdened with over $800 million, which proved unsustainable amid competing pressures from larger retailers and shifts toward online shopping options. Big box rivals like Amazon and Walmart, as well as seasonal competitors like Spirit Halloween, have increasingly siphoned off Party City’s market share.
Litwin pointed to the deeply ingrained macroeconomic pressures as barriers to success for the company: "Party City's very best efforts have not been enough to overcome its financial challenges." Inflation has caused operating costs to surge, adversely affecting consumer spending habits and leading to declining sales for the shop.
The closures are set to begin immediately, with most stores anticipating full shutdown by late February 2024. Prior to this announcement, Party City had already shuttered more than 80 locations between the end of 2022 and August 2023 due to underperformance.
Reaction from customers has been steeped in nostalgia, as many have fond memories from their childhood attached to the party supplies chain. Stephanie Campos, who was buying balloons at the Greenwich Village location, remarked, "I think it's a shame because I grew up going to Party City. It’s somewhere I used to look forward to for parties." Jared Barnett, another shopper, expressed his desire to return one last time to bid farewell, stating, "I came to say goodbye. A lot of memories, you know, from growing up to planning socials at my fraternity."
While the company plans to begin going-out-of-business sales, it faces frustration from many employees at both stores and headquarters over the lack of communication leading up to the decision. Many corporate staff members noted they felt blindsided and were not made aware of any potential financial turmoil at recent meetings. One former employee mentioned, "Management had expressed optimism about Party City’s overall business," contrasting sharply with the abrupt announcement of the wind-down process.
The fallout from Party City's bankruptcy raises questions about the overall retail environment, which has seen increasing numbers of bankruptcies this year as consumer spending pulls back. Big Lots recently announced it would begin its own closeout sales after failing to secure necessary financing to remain afloat. Analysts predict 2024 may witness the highest rate of store closures since 2020 as retailers grapple with inflation, the post-pandemic economy, and changing customer behaviors.
Party City, the largest party supply retailer in the U.S. with approximately 6,400 full-time and 10,100 part-time employees as of 2021, has faced multiple industry challenges. E-commerce growth, rising costs, and external economic factors have collectively spelled doom for this once-popular chain, causing widespread disappointment among both employees and consumers alike. The transition to closing its doors marks the end of not just the company, but also the community memories tied to its festive offerings.
With hundreds of loyal customers and employees left without their familiar gathering place during party planning seasons, the ramifications of Party City’s bankruptcy extend deeply beyond just business numbers. All eyes remain on the wider retail industry as it continues to navigate these complex challenges.
