The party may be winding down.
Party City is planning to file for its second bankruptcy in nearly two years as the company’s sales figures continue to struggle, according to a report.
The New Jersey-based party supply and craft retailer is behind on rent in some of its 850 locations across the US, Bloomberg News reported on Tuesday, citing people familiar with the matter.
Party City, founded by Steve Mandell in 1986 in New Jersey, first filed for bankruptcy in January 2023 with about $1.8 billion in debt.
However, the party supplier avoided liquidation and reduced its debt by about $1 billion by closing more than 60 stores, notably in Kansas, New York, Missouri, and Kentucky.
The company exited Chapter 11 protection in September.
Party City has faced growing competition from powerhouse retailers such as Walmart and Target, and increasingly occasion-based pop-up stores such as Spirit Halloween for years.
The pressure intensified due to the effects of the COVID pandemic, a helium shortage — a gas the chain relied on for its party balloons — and slowing consumer demand.
Party City was successfully expanding before the pandemic and had sales of $2.35 billion in 2019, according to Forbes.
The Post has reached out to Party City for comment.
Last year, Mandell pinned the retailer’s implosion on a lack of bargains and variety at its stores — a problem he claims was created when private equity executives locked it into a large supply deal with a manufacturer they already owned for roughly 80% of its supply.
Party City was bought by private equity firms Berkshire Partners and Weston Presidio in 2005.
“They [new owners] took out the top two things that made this company very special,” Mandell previously told The Post.
“First, we were the discount party superstore. Today, it is not a discount store. The prices are top dollar.”
“Second, Party City had great variety,” he added.
The firms also owned the party supply manufacturer Amscan, which helped do “away with the competition,” the founder said.
However, Mandell suggested that after the chain’s acquisition, “all of the innovation is long gone,” causing a “huge problem.”
In 2012, Thomas H. Lee Partners bought the company for $584 million down in a $2.69 billion deal, investing only 22% in equity.
The following year, the owners had Party City borrow $338 million to pay themselves a dividend.
Party City’s leading market position and 35% profit margins made it relatively easy to take the excess cash to pay loans for a few years.
The company then went public in 2015.
Soon, the party supply chain didn’t have much wiggle room to offer better prices than its rivals.
“If you can’t afford to give discounts, maybe you can’t afford to be in business,” Mandell said.
He also pointed to Party City’s failures to maximize profits during the key Halloween period, representing about one-quarter of the company’s sales.
“Spirit Halloween opened 1,400 stores this fall and were unfazed by the pandemic,” Mandell said in 2023. “Party City had 100 Halloween City pop-up stores.”
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