Party City has filed for Chapter 11 bankruptcy protection in a bid to restructure its heavy debt load and keep its doors open after supply chain woes, rising inflation and a consumer slowdown took a chunk out of sales, reports CNBC. The party supplies retailer has secured a $150 million bankruptcy loan and will seek approval to use half of those funds to immediately pay wages and vendors, among other expenses. Party City tapped retail consultants AlixPartners in November as its financial advisor, which determined filing for bankruptcy was the best way to save the business. Its franchised stores, Anagram balloon business and subsidiaries outside the U.S. are not part of the Chapter 11 proceedings.
Total Retail’s Take: Party City is using bankruptcy as an opportunity to restructure its debt and keep a smaller number of stores open. The retailer operates over 800 stores, an outsized number which has become unprofitable following years of pandemic-related business challenges as well as the growth of e-commerce shopping. In court papers, David Orlofsky of consulting firm AlixPartners, the company’s chief restructuring officer, noted “continued and historic inflationary pressures and a declining stock price” led the company and its team of advisors to move forward with restructuring under bankruptcy. The move will allow Party City to fix its balance sheet and avoid liquidation.
An ongoing shortage of helium for balloons also created significant challenges for Party City, as balloons are a signature product for the retailer. Party City has reported declining sales since reaching $2.35 billion in revenue in 2019.
“As we take this important step to put our business on stronger financial footing for the future, we are as committed as ever to inspiring joy by making it easy for our customers to create unforgettable memories,” Party City’s CEO Brad Weston said in a Tuesday news release.
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