Party City filed for bankruptcy protection Tuesday, weighed down by competition and years of financial losses.
The largest retailer of entertainment and Halloween specialty goods in the United States said in a regulatory filing that it has reached an agreement with debt holders to reduce $1.7 billion in debt.
The company said it has secured $150 million in financing to keep its stores open and operations running. As of October, the Company had a total of 761 Party City (PRTI) stores and 149 Halloween City pop-up stores. In 2021, Party City (PRTI) had more than 16,000 full-time and part-time employees.
Party City has struggled for years with competition for party merchandise and decorations, especially from large chains and online retailers that sell a wide variety of merchandise.
Target in particular increased its inventory of party and special event merchandise, said Neil Saunders, an analyst at GlobalData Retail.
“This is aimed squarely at the family demographic that has traditionally shopped Party City,” he said.
The advent of Spirit Halloween, a pop-up store model, also impacted Party City’s sales during the key Halloween season.
However, competition is not the only factor that led to the collapse of Party City.
The company has had to contend with rising costs during the pandemic and a shortage of helium, which has hurt its all-important balloon business. Balloons are “a focal point of our growth strategy and are a key driver of our differentiated brand experience,” the company said in a regulatory filing.
Between 2017 and 2021, Party City’s sales fell 8% to $2.2 billion. The company expects sales to remain flat in 2022. The company also lost money every year between 2019 and 2021 and said it was on track to lose up to $199 million in 2022.
Party City said in December it was at risk of delisting from the New York Stock Exchange after its stock fell below an average of $1 a share over 30 trading days.
Party City’s bankruptcy could be a sign of trouble for the retail industry this year.
Retailers had a weak holiday season, December retail sales showed, and that could force some companies to close stores or file for bankruptcy.
Other struggling chains are at increased risk of bankruptcy as consumer spending softens.
Bed Bath & Beyond ( BBBI ) issued a gloomy message about its future this month, warning that a bankruptcy filing is a possible outcome for the company.
There is “significant doubt about the company’s ability to continue” due to the deteriorating financial situation.