Party City Brand Check-up: The Party Moved to Other Aisles
Party City filed for Chapter 11 on December 21, 2024, its second filing in under two years, and is closing its nearly 700 stores. Fourteen months earlier, then chief executive Brad Weston spoke of the company’s “legacy as the go-to destination for all things celebration.” We examine how the chain lost its reasons to visit, and what growing companies can take from it.
Key takeaways
- Party City filed for Chapter 11 a second time on December 21, 2024, and is closing all of its nearly 700 stores.
- Debt from its private equity years stood at $2.2 billion at the 2015 IPO, and net interest expense was $102.6 million in 2022 alone.
- Spirit Halloween, Amazon and mass merchants such as Target competed harder for occasions that once brought shoppers to Party City.
- A helium shortage hit its signature balloon business while inflation squeezed its margins.
Download the full Party City Brand Check-up (PDF): vital signs, timeline, diagnosis, treatment and sources.
Symptoms: a category leader in steady retreat
Party City’s sales had stalled well before the end. Net sales were $2.17 billion in 2022, flat on 2021, and the company booked a net loss of $942.6 million after writing down goodwill and intangible assets. Revenue had reached about $2.35 billion in 2019. In the third quarter of 2023, net sales fell about 19% to $407.1 million. Between July 2023 and July 2024, comparable store sales fell 9.5%.
The footprint shrank as well, from about 823 stores at the January 2023 filing to nearly 700 at the second. The shares closed at a high of $22.32 on July 22, 2015, and were trading at 37 cents after the first filing. They were cancelled when lenders took control.
Diagnosis: debt took away the margin for error
Thomas H. Lee Partners bought most of the company in 2012 for $2.69 billion, with $1.5 billion of debt financing. Debt stood at $2.2 billion at the 2015 IPO and at about $1.45 billion of funded debt when Party City first filed for Chapter 11. Net interest expense was $102.6 million in 2022 alone. That is money a specialist needs for stores, prices and brand building. The 2023 restructuring cut nearly $1 billion of debt. It did not bring shoppers back.
Diagnosis: the reasons to visit moved to other stores
Shoppers did not visit Party City just for paper plates. They came to make an event easy, a clear job to be done. Rivals learned to do that job closer to where people already shop. GlobalData’s Neil Saunders told Retail Dive that Target and Amazon had increased their party offerings while pop-ups such as Spirit Halloween expanded. A Jungle Scout report found that 44% of consumers turn to Amazon first for Halloween shopping, while just 10% start on Party City’s or Spirit Halloween’s websites.
Halloween also shrank inside the business. In November 2021, then-CFO Todd Vogensen said: “Halloween is now low double-digit of our annual performance versus over 20%, just a few years ago.” By September 2023, about 30 Halloween City pop-ups were open, against 250 planned for 2019. Spirit Halloween was set to run more than 1,500 seasonal locations that year. When a rival owns the occasion, the specialist loses its position as the default stop.
Diagnosis: a signature product tied to a scarce input
Balloons were a signature product, and balloons need helium. In its first bankruptcy, the company told the court that a global helium shortage, driven mainly by reduced supply from producers including Russia, had hurt its profits. In May 2022, management put higher helium prices for the second quarter at an estimated $7 million headwind. Inflation added to the strain, as retail price increases did not fully offset higher costs. A specialist that cannot win on price has to win on range and service, and both need investment.
The restructuring and the wind-down
The 2023 plan eliminated nearly $1 billion in debt and handed ownership to a group of noteholders. In September 2024 the company looked for new capital and fell short. On December 20, CEO Barry Litwin told staff it was “necessary to commence a wind down process immediately.” The next day Party City filed for Chapter 11 in the Southern District of Texas with about $400 million in debt and hired Gordon Brothers to assist with the liquidation.
As we write, the company-owned stores are being liquidated, and letters to store staff said they would close in February. A franchisee said 29 independently owned franchise stores would stay open, and Canadian Tire agreed to buy the 65 Canadian stores in 2019.
What growing companies can learn
Know the job customers hire you for, and watch who else is learning to do it. Do not let one season or one input carry the brand. Keep debt at a level that lets you keep investing through a bad year. Party City lost the reasons to make the trip, and its balance sheet left no room to win them back.
This check-up uses public information available on January 7, 2025. It is brand and marketing analysis, not investment advice.
Find out where your marketing is bleeding.
Brand Doctor is based in Vancouver and offers a free marketing diagnosis to businesses across Canada, in person or remotely. You leave knowing what’s holding growth back and what to fix first.
