Just four months after welcoming Barry Litwin as its new president and CEO, Party City announced that it filed for Chapter 11 bankruptcy. The move accompanied news that the retailer, headquartered in Woodcliff Lake, New Jersey, would begin winding down its retail and wholesale operations nationwide.

Party City Holdings is No. 301 in the Top 1000. The Top 1000 Database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales. There, it falls under the Specialty category. Digital Commerce 360 projects Party City’s web sales in 2024 will reach $283.9 million.

Party City web sales by year

Party City’s bankruptcy announcement

Previously, Party City filed for Chapter 11 bankruptcy in January 2023. As it does so for a second time in two years, the merchant said it would commence going-out-of-business sales at all of its stores. The company currently has around 700 stores across the U.S., according to its official numbers.

In a public release, Party City Holdco Inc. said its decision came “following exhaustive efforts” to identify an option that would allow for continued operations. It cited “an immensely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors” as the reasons behind its ultimate decision. The Chapter 11 filing was made in the U.S. Bankruptcy Court for the Southern District of Texas.

Party City noted in its public statements that its 2023 restructuring allowed it to eliminate almost $1 billion in debt. Nevertheless, it stated that “macroeconomic headwinds more recently proved too severe for the Company to overcome.”

Operations during bankruptcy

As operations wind down at Party City stores, the retailer indicated that it planned to retain “more than 95% of its 12,000 employees for some time to assist with the wind down process.”

In the meantime, Party City Holdco Inc. has engaged Paul, Weiss, Rifkind, Wharton & Garrison LLP and Porter Hedges LLP to serve as its legal counsel. In addition, it has asked AlixPartners, LLP to serve as its financial advisor during the bankruptcy process. The firm Gordon Brothers will supervise the going-out-of-business sales at Party City’s stores.

Some plans are subject to court approval. However, an online portal has been set up with updates on filings and contact info during the claims process.

According to its court filings, Party City Holdco Inc. has already begun the process of shutting down its Hong Kong-based subsidiary PCHI Asia Limited and is in the process of liquidating related assets.

Among the causes leading up to the bankruptcy, filings show that while Party City had implemented an inventory management initiative to “right-size PCHI’s inventory position from $450 million to a more sustainable $300 million over approximately one year,” the plan also involved “sales of inventory at decreased margins relative to historical levels.” That, in turn, meant that the value of Party City’s inventory was reduced, leading to a lower borrowing base for credit purposes and a reduced amount of available liquidity.

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