Party City has filed for bankruptcy protection for the second time in less than two years, but this go-around the retailer plans to liquidate and close its roughly 700 locations.
The Woodcliff Lakes, New Jersey-based company, which has been operating for nearly 40 years, on Saturday voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. Party City plans to begin winding down all of its retail and wholesale operations and hold going-out-of-business sales at its stores.
"The decision was made following exhaustive efforts by the company to find a path forward that would allow continued operations in an immensely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors," Party City said in a statement.
Party City didn't respond to an email from CoStar News on Sunday, but published reports said a New Jersey customer was told that the stores would remain open past the holidays and the Super Bowl, closing by February.
The Chapter 11 filing by Party City, which bills itself as North America’s largest party goods retailer, came as little surprise to those familiar with its struggles. But the severity of it's woes became public on Friday, when CNN reported that Party City CEO Barry Litwin informed corporate employees they were out of their jobs effective immediately and the company was going out of business.
Earlier this week, Party City's website said the company had 850 stores; the site was updated this weekend to lower the number to 700 company-owned and franchise store locations across North America.
At least 29 stores are owned by franchisees that have no plans to close, according to Mitesh Patel. He and his wife operate two Party City stores in Austin, Texas, that will keep their doors open, he said in an email to Costar News on Sunday night. Party City franchisees also operate several stores in San Antonio, Texas, that will continue to serve customers. All these franchisees are small-family businesses operators, according to Patel.
Party City's demise caps a difficult year for U.S. retailers, one marked by thousands of store closings, bankruptcies and liquidations. Just last week, Columbus, Ohio-based Big Lots announced it was shutting all its remaining stores, a list of 870 locations.
Party City first filed for bankruptcy in January 2023, and it emerged from the process in September that year, with less debt and a slightly smaller store footprint. In its statement, Party City referenced its prior Chapter 11 restructuring, in which it eliminated nearly $1 billion in debt.
"As with many other retailers, macroeconomic headwinds more recently proved too severe for the company to overcome," Party City said.
The company will retain more than 95% of its 12,000 employees "for some time to assist with the wind-down process," it said.
Party City has filed customary motions with the court seeking authority to commence going-out-of-business sales and uphold its commitments to employees during the wind down. It said its senior lenders have committed to provide the financial support necessary to fund operations through the wind-down, subject to court approval.
The retailer sent an email to customers on Saturday afternoon about its demise.
"For almost four decades, we have been proud to be your one-stop-shop for all things celebration ... Given our long history supporting our customers’ most joyous moments, it is all the more difficult to share that we will soon be closing our doors," Party City said in its email. "Like many retailers, we’ve been operating in an immensely challenging environment with inflationary pressures on both costs and consumer spending, and while we did everything we could to navigate these headwinds, our very best efforts were ultimately not enough to overcome these challenges."
The retailer told customers that its stores are still be open for now so they can "stock up on everything — from holiday and New Year’s Eve decorations to birthday party supplies and beyond — while the selection is best."
For the record
Paul, Weiss, Rifkind, Wharton & Garrison and Porter Hedges are serving as legal counsel and AlixPartners is serving as financial advisor to Party City. Gordon Brothers will supervise the going-out-of-business sales under the company’s management.
This story was updated to include comments from Party City franchisees who say they will remain open.