Party City files for bankruptcy after struggling with rising prices and competition from big stores

Party City has filed for Chapter 11 bankruptcy protection after struggling with rising prices and a pullback in customer spending as the celebration retailer is trading at 40 cents on the stock exchange after once reaching nearly $23. 

The company, based in Woodcliff Lake, New Jersey, said that its franchise stores, subsidiaries outside of the US, and its foil balloons Anagram business are not part of the restructuring and will remain core components of its business. 

Party City Holdco Inc., said its more than 800 company-owned and franchise stores throughout North America will remain open, and customers can still shop on the company website.

The company was hit hard during the pandemic as celebrations diminished due to COVID-19 restrictions and has since been hit by the global supply chain crisis, and soaring inflations causing American households to start penny-pinching. 

In order to combat its dire economic status - as the company's stock is currently trading at less than 40 cents - it filed for bankruptcy and has committed to a $150million debtor-in-possession financing plan with Ad Hoc Group. 

Party City filed for Chapter 11 bankruptcy protection on Tuesday. The New Jersey-based company said its franchise stores, subsidiaries outside of the US, and its foil balloons Anagram business are not part of the restructuring

The company was hit hard during the pandemic as celebrations diminishes due to COVID-19 restrictions, as well as, with the supply chain crisis and inflation. It secured a commitment for $150million in debtor-in-possession financing plan, which is expected to be completed by the second quarter

The chain plan is an expedited restructuring that it said would substantially lower its debt and free up cash. It said the financing, which is subject to court approval, would provide ample cash to continue operations.

Shares rose more than 10 percent before the market opened Wednesday. 

'Today's action to strengthen PCHI's balance sheet will bolster our ability to further advance our strategic priorities and continue to innovate and elevate the customer experience,' CEO Brad Weston said in a statement. 

'As we take this important step to put our business on a 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.'  

In addition, Party City for years has faced growing competition from Walmart and Target and increasingly from occasion-based pop-up stores such as Spirt Halloween. That pressure has intensified in an era of rising prices, including for helium used in party balloons, and slowing consumer demand.

Neil Saunders, managing director of Global Data Retail, believes the company needs to 'financially restructure and to rethink its approach' in order to pull through even after declaring bankruptcy. 

'Party City used to be one of the best games in town, but it is now something of an also-ran operation,' Saunders said. 'There is likely still something of a role for Party City.' 

Saunders believes Party City should think about how it reaches customers including looking at more attractive locations for its stores and beefing up its e-commerce site.

The company desperately needs a positive incline as the Securities and Exchange Commission warned Party City that it was at risk of being delisted by the New York Stock Exchange for failing to maintain an average $1 per share stock price over a 30-day period in December. 

The SEC also threatened the company in December to remove it from the NYSE after its stock price stayed below $1 for more than 30 days

It is currently trading at around 40 cents, far from its high of $22.60 in 2015

A month prior to that, Party City reported its quarterly losses widened, reflecting a 3.2 percent drop in comparable store sales. Overall sales were within expectations but at the lower end.

Shares are currently hovering around 40 cents. Within the last 12 months, the company's high share price was $5.40, exactly one year ago, before taking a gigantic plunge in early May to $3.21. Throughout August and October, it did see a small rise before plummeting below a dollar during November and December. 

The company went public in April 2015 at $17 a share and traded as high as $22.60 in April 2015.

Party City expects the company restructuring to be completed in the second quarter.