Party City faces second bankruptcy in less than two years: report

The party could unwind.

According to a report, Party City plans to file for bankruptcy for the second time in nearly two years as the company’s sales continue to be poor.

The New Jersey-based party supplies and crafts retailer is behind on rent at some of its 850 locations across the U.S., Bloomberg News reported Tuesday, citing people familiar with the matter.

Party City, founded in New Jersey in 1986 by Steve Mandell, filed for bankruptcy for the first time in January 2023 with debts of about $1.8 billion.

However, the party provider was able to avoid liquidation and reduce its debt by around $1 billion by closing more than 60 stores, particularly in Kansas, New York, Missouri and Kentucky.

The company exited Chapter 11 protection in September.

Party City has faced growing competition for years from strong retailers like Walmart and Target, as well as increasingly occasion-focused pop-up stores like Spirit Halloween.

Pressure intensified due to the impact of the COVID pandemic, a shortage of helium – a gas the chain relied on for its party balloons – and slowing consumer demand.

According to Forbes, Party City was already successfully expanding before the pandemic, generating $2.35 billion in revenue in 2019.

The Post has reached out to Party City for comment.

Last year, Mandell attributed the retailer’s implosion to a lack of bargains and variety in its stores – a problem he said arose when private equity executives secured a large supply deal with a manufacturer they already had for about 80% of the store offer.

Party City was purchased in 2005 by private equity firms Berkshire Partners and Weston Presidio.

“They (the new owners) highlighted the two most important things that made this company very special,” Mandell previously told The Post.

“First we were the discount party supermarket. Today it is no longer a discount store. Prices are top dollar.”

“Secondly, Party City offered a lot of variety,” he added.

The companies included party supplies maker Amscan, which helped “eliminate the competition,” the founder said.

However, Mandell pointed out that after taking over the chain, “all the innovation was long gone,” which posed a “huge problem.”

In 2012, Thomas H. Lee Partners purchased the company for $584 million in a $2.69 billion deal, investing just 22% in equity.

The following year, owners let Party City borrow $338 million to pay a dividend.

Party City’s leading market position and 35% profit margin made it relatively easy to use the excess cash to pay off loans for a few years.

The company then went public in 2015.

Soon the party supply chain no longer had much room to offer better prices than its competitors.

“If you can’t afford to discount, maybe you can’t afford to be in business,” Mandell said.

He also noted that Party City failed to maximize profits during the key Halloween period, which accounted for about a quarter of the company’s sales.

“Spirit Halloween opened 1,400 stores this fall and was unfazed by the pandemic,” Mandell said in 2023. “Party City had 100 Halloween City pop-up stores.”