Party City Holdco. Inc. filed for Chapter 11 bankruptcy protection on Tuesday, citing COVID headwinds.
Dwindling sales during the COVID-19 lockdowns, difficulties in maintaining inventory, shortages of helium, and stores closing down could be among factors leading to the filing.
The company—which has 800 owned stores and franchises across North America—said in a press release that only its owned stores will be impacted by the filing, and the franchises, non-U.S. stores, and Anagram business will continue operations.
Party City secured $150 million for its “expedited restructuring” and for keeping up its operations, according to the release.
Based in Woodcliff Lake, New Jersey, the company said bankruptcy restructuring will allow it to lower its debt and free up cash.
Troubled retailers often seek bankruptcy protection following the holiday season to take advantage of the cash cushion provided by recent sales.
Bed Bath & Beyond Inc. raised doubts earlier this month about its ability to continue as a going concern.
Party City reported $1 billion to $10 billion of estimated assets and liabilities.
The company said it also faced higher costs in freight, labor, and raw material needs.
Its stock fell 57 percent on Jan. 6 after the Wall Street Journal reported that it might file for bankruptcy in the coming weeks.
Party City for years has faced growing competition from Walmart and Target and increasingly from occasion-based pop-up stores such as Spirit Halloween. That pressure has intensified in an era of rising prices, including for helium used in party balloons, as well as slowing consumer demand.
“Party City used to be one of the best games in town, but it is now something of an also-ran operation,” said Neil Saunders, managing director of GlobalData Retail. “There is likely still something of a role for Party City, but the company needs to financially restructure and to rethink its approach.”
Saunders believes Party City should think about how it reaches customers, including looking at more attractive locations for its stores and beefing up its e-commerce site.
