Party Organizer Giant, Party City, Seeks Legal Protection through Bankruptcy Filing
Following the announcement to staff on Friday, Party City informed employees that it would commence the process of shutting down operations. As the leading supplier of party goods in the nation, Party City stated in a public release that filing for Chapter 11 bankruptcy would serve to maximize returns for its shareholders and facilitate the closure in the most efficient manner possible.
Employees received correspondence on Friday, indicating that all stores would close by February 28. Party City disclosed that its over 700 retail outlets would continue operations with "going out of business" sales until inventories deplete. Approximately 95% of the company's 12,000 workers will keep their positions ahead of the store closures, according to the company's announcement.
The closure notice included the following statement in its filing: "We really appreciate having shared in the joy of your special moments over the past years. In the upcoming days, we hope to welcome you once more to pick up your favorite items, whether you're organizing a big celebration now or planning ahead for future milestone events."
Party City, headquartered in New Jersey, was unable to contend with mounting inflationary costs affecting product prices and subsequently reduced customer spending, as well as other factors such as its hefty $800 million debt. As a result, the company filed for bankruptcy for the second time, having declared bankruptcy in January 2023 after grappling with substantial debt nearing $1.7 billion. With successful negotiations to reduce debt by almost a billion dollars and closures of over 80 locations between late-2022 and August 2024, Party City was able to emerge from bankruptcy a month later under the leadership of CEO Barry Litwin.
Party City declared that it had painstakingly explored alternative solutions to maintain operations.
"What I want you to understand is that we have done everything possible to avoid this situation," Litwin reportedly said to corporate employees during a team meeting on Friday, which CNN obtained a glimpse of. "Regrettably, it's necessary to initiate a liquidation process at this time."
Party City has encountered significant competition from e-commerce platforms and pop-up supply concepts like Spirit Halloween. Large retailers have also impeded the growth of smaller chains, according to the report.
Anticipating closures, major chains are poised to shutter the highest number of stores within a single year since 2020, as per Coresight Research. On Thursday, Big Lots announced it would commence "going out of business" sales at all of its locations following the collapse of a private equity firm-led rescue plan.
CNN's Emmy Abbassi and Jordan Valinsky contributed to this report.
During the liquidation process, Party City's business operations will significantly change. Many stores will conduct "going out of business" sales to deplete inventory.
Despite facing stiff competition from e-commerce platforms and larger retailers, Party City's debt and inflationary costs were major factors in its decision to file for bankruptcy.
