PARTY City filed for bankruptcy just 24 hours after announcing the closure of all stores.
This comes just one year after the company emerged from bankruptcy in September last year.
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During this restructuring, approximately $1 billion in debt was eliminated, but at the time, the company was carrying twice that amount.
Since previous efforts were not enough to get Party City back on its feet, it has now refiled for Chapter 11 bankruptcy protection.
After nearly 40 years of selling party goods, the retailer announced on December 22 that it was beginning to “scale back” all of its operations.
This consists of approximately 700 stores and 12,000 employees.
Party City has confirmed that during the closure, more than 95% of staff will be kept on board.
“The decision was made following the company’s strenuous efforts to find a path forward that would allow operations to continue in an extremely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors,” a press release said.
It further claimed that “macroeconomic headwinds…have proven too severe for the company to overcome.”
In addition to having to address inflation, Party City's customer base has been filled with competitors like Amazon, Walmart and Target.
All stores will be permanently closed by February 28, according to CNN.
Until then, shoppers will be welcomed with various sale offers that include “amazing deals and deep discounts on amazing merchandise.”
Party City CEO Barry Litwin said in a video conference that the layoff message was “the hardest message I've ever delivered,” CNN reported.
The CEO, who joined just four months ago, said the company's “best efforts were not enough to overcome” its financial challenges.
“It's really important for you to know that we did everything we could to try to avoid this outcome,” Litwin said.
“Unfortunately, it is necessary to begin the liquidation process immediately.”
How does bankruptcy work?
Bankruptcy is a specific legal process that helps businesses get rid of debts they cannot pay.
This process allows businesses to start over and obtain new credit.
Bankruptcies, which are overseen by federal courts, allow a company to more easily sell its assets to pay off creditors, according to Investopedia.
Chapter 11, a common process for businesses, is used to restructure a business with the goal of remaining open — even if that means selling most of the company's holdings.
Chapter 7, on the other hand, sells all of the company's assets, putting it out of business.
Instead, Chapter 15 allows cooperation between U.S. and foreign courts to conduct bankruptcy proceedings with “parties in interest involving more than one country,” according to U.S. courts.
Meanwhile, a 102-store home goods retailer followed suit and also filed for bankruptcy.
The Container Store, founded in 1978, has faced weak sales and now has more than $240 million in debt.
But despite lockdown fears, CEO Satish Malhorta remains optimistic.
“The container store is here to stay,” said Malhotra, who joined the company in 2021.
“Our strategy is sound, and we believe the steps we are taking today will allow us to continue to grow our business, deepen customer relationships, expand our reach, and enhance our capabilities.”
Meanwhile, Big Lots, which declared bankruptcy three months ago, is in the process of closing all of its remaining 963 stores.
The United States is preparing to close 45,000 stores
Experts have warned that about 45,000 brick-and-mortar stores may close their doors in the next five years.
Many major retailers have announced the closure of their stores or gone out of business altogether in recent years.
Chains like Foot Locker, Sally Beauty, Tuesday Morning, Shore City, Z Gallerie, and Mitchell Gold + Bob Williams have gone out of business.
Bed Bath & Beyond has closed all of its brick-and-mortar stores and is now an online-only retailer.
The retailers most affected have been apparel, consumer electronics, sporting goods, hobbies, books, music and home furnishing stores since the beginning of 2019.
UBS expects the total number of retail stores to decline by 45,000 from 958,000 to 913,000.
Despite this, the report says some stores should thrive while others decline.
Retailers like Walmart, Costco, Home Depot and Target could be among the winners, she said.
