Party City, the well-known party supply retailer, may soon file for its second bankruptcy in less than two years, highlighting ongoing financial difficulties.
According to a Bloomberg News report, the New Jersey-based company is falling behind on rent at some of its 850 U.S. locations. Despite attempts to rebound from its initial bankruptcy in early 2023, the retailer continues to struggle with declining sales, stiff competition, and operational challenges, reported the New York Post.
Founded in 1986 by Steve Mandell, Party City became a household name, offering affordable party supplies and a wide variety of products. The company first filed for bankruptcy in January 2023 due to mounting debts of $1.8 billion. After restructuring, it reduced its debt by $1 billion and closed over 60 stores across several states, including New York, Kansas, and Kentucky. Emerging from Chapter 11 protection by September, Party City aimed to stabilize its finances and refocus on growth.
However, the road to recovery has been rocky.
Party City faces increasing competition from retail giants like Walmart and Target and seasonal pop-up stores such as Spirit Halloween. The COVID-19 pandemic exacerbated its troubles by disrupting supply chains and reducing consumer demand for social gatherings. A global helium shortage also negatively impacted its signature balloon business, further straining operations.
Mandell, the company’s founder, has been critical of the private equity firms that acquired Party City in 2005.
He has argued that their decisions undermined the brand’s value proposition. According to Mandell, Party City lost its edge as a discount superstore and now charges higher prices for a limited product selection. He also pointed to the acquisition of Amscan, a major party supply manufacturer, as a move that eliminated competition but stifled innovation.
Under its private equity ownership, Party City underwent significant financial restructuring.
In 2012, Thomas H. Lee Partners purchased the chain in a $2.69 billion deal, investing only a small equity percentage. The following year, the company borrowed $338 million to pay a dividend to its owners. While this strategy initially worked due to Party City’s high-profit margins and market dominance, it left the retailer vulnerable to financial downturns.
Party City’s sales reached $2.35 billion in 2019, but the pandemic drastically altered consumer behavior, and the retailer has yet to recover.
Efforts to reinvigorate the brand have not yielded significant results, and experts warn that another bankruptcy filing could lead to further closures and possible liquidation. The company’s inability to regain its market share underscores broader challenges in the retail sector, particularly for specialty stores.