PARTY City filed for bankruptcy just 24 hours after announcing the closure of all stores.
It comes just a year after the business exited bankruptcy in September last year.
Party City has filed for bankruptcy for the second time in two years as it announces closures (stock)[/caption]
During this restructuring, almost $1 billion of debt was removed, but at the time, the business was carrying around double that.
With the previous efforts not being enough to get Party City back on its feet, it has now refiled for Chapter 11 bankruptcy protection.
After almost 40 years of selling party goods, the retailer announced on December 22 that it has started to “wind down” all of its operations.
This consists of around 700 stores and 12,000 employees.
Party City has confirmed that during the closing down process, over 95% of staff will be kept on board.
“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,” a press release stated.
It further claimed that “macroeconomic headwinds…proved too severe for the Company to overcome.”
As well as having to tackle inflation, Party City’s customer base was flooded with competitors like Amazon, Walmart and Target.
All stores will be closed permanently by February 28, according to CNN.
Until then, shoppers will be greeted by various closing-down sales with “incredible deals and deep discounts on amazing merchandise.”
CNN reported that Party City CEO Barry Litwin said in a video conference that the going-out-of-business message was “the most difficult I’ve ever had to deliver.”
The CEO who joined just four months ago said that the company’s “very best efforts have not been enough to overcome” its financial challenges.
“It’s really important for you to know that we’ve done everything possible that we could to try to avoid this outcome,” Litwin said.
“Unfortunately, it’s necessary to commence a winddown process immediately.”
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
Meanwhile, a home goods retailer with 102 stores has followed suit by also filing for bankruptcy.
The Container store founded in 1978 has faced poor sales and now has debts of over $240 million.
But despite closure fears, CEO Satish Malhorta is remaining hopeful.
“The Container Store is here to stay,” Malhotra, who joined the company in 2021, said.
“Our strategy is sound, and we believe the steps we are taking today will allow us to continue to advance our business, deepen customer relationships, expand our reach, and strengthen our capabilities.”
Meanwhile, Big Lots which filed for bankruptcy three months ago is in the process of closing all remaining 963 stores.
US braces for ‘45,000 store closures’
Some 45,000 bricks-and-mortar stores could close in the next five years, experts have warned.
Several major retailers have announced store closures or gone out of business altogether in recent years.
Chains such as Foot Locker, Sally Beauty, Tuesday Morning, Shore City, Z Gallerie, and Mitchell Gold + Bob Williams have all gone out of business.
Bed Bath & Beyond has closed all of its brick-and-mortar stores and is now an online-only retailer.
The most affected retailers have been clothing, consumer electronics, sporting goods, hobby, book, music, and home furnishing stores since the start of 2019.
UBS has predicted the total number of retail stores will drop by 45k from 958k to 913k.
Despite that, the report says that certain stores should thrive while others decline.
It said retailers such as Walmart, Costco, Home Depot, and Target, could be among the winners.
