Party City Officially Files For Bankruptcy
Party City officially filed for Chapter 11 Bankruptcy protection in a last-ditch effort to save its business by employing restructuring strategies.
Party City could be closing its doors. The party store has filed for Chapter 11 bankruptcy protection to try and save its business. By going down this route, it can restructure its debt, and there is a chance it could stay in business.
A high number of businesses across America are in Party city’s shoes as the post-pandemic economy is turning out worse than expected. People and businesses are plagued with supply chain issues, hyperinflation, and a slower economy. Party city decided that filing for bankruptcy was their only option in November after they were advised it was their best chance to save their failing business.
Before the pandemic in 2019, Party city was a high-flying business with over $2 billion in revenue. But since then, as internet-based shopping became more popular, it had to battle it out with retailers like Amazon and Walmart to retain their customer base. One of its biggest mistakes is not following every other brand into e-commerce. Instead, it tried to keep its 800 physical stores open nationwide, which ate massively into its profits.
During the COVID-19 pandemic, like many other businesses, it was forced to shut, and sales ground to a halt as they had no e-commerce to rely on. Also, during that time, people stopped celebrating events they usually would have, like birthdays and Halloween.
They thought once the pandemic was over, they could be able to claw back some profits but due to supply chain issues that affected every business nationwide put more pressure on them. Their biggest-selling product, balloons, was massively influenced by the shortages.
Since then, Party city’s business has been slowly slipping away. Their bankruptcy filing comes as consumer spending slows down even more as economists say a recession is almost inevitable. Without customers, Party city’s debt just keeps increasing, and as of September 2022, they were $1.67 billion in debt.
But they are not giving up yet; they are taking this event as a chance to restructure the company and start anew. They will keep a small number of stores open and are confident they will retain their title as the “one-stop-shop” for celebrating life’s special moments.
According to papers filed with US Securities and Exchange Commission, they have already secured a plan to reduce its debt through a $150 million bankruptcy loan. Party City will use half of this money to pay employee wages, vendors, and other expenses.
The company is looking to reduce its costs by $30 million, which sadly includes reducing its staff by 19%. As of this week, Party city has over 16,000 staff nationwide.
Going forward, while Party City has made the correct decision to restructure its company, it will still have a difficult time with the cost of living crisis and inflation increasing prices weekly. For two reasons, consumers have stopped spending so much of their money; the cost of essential bills has gone so high that they do not have expendable money, or they are saving their spare cash for more challenging times. Either way, Party City still fight on its hands.
