AILSA CHANG, HOST:
Lunar New Year, Valentine's Day, Mardi Gras - for a range of holidays, celebrations, kids' and grown-up birthdays, Americans have shopped at Party City. But this purveyor of balloons, costumes and party supplies has filed for bankruptcy. NPR's Alina Selyukh explains.
ALINA SELYUKH, BYLINE: Years ago, Party City held big promise. The stuff it sells didn't used to have a ton of competition.
(SOUNDBITE OF AD)
UNIDENTIFIED PERSON #1: You boo you, only at Party City.
SELYUKH: Vampire teeth, party hats, wigs and streamers - a vast selection of fairly cheap items unmatched by other stores - things that people like to buy in person, not online.
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UNIDENTIFIED PERSON #2: Shop Party City for Valentine's Day.
...Cinco de Mayo.
...Fourth of July.
UNIDENTIFIED PERSON #3: ...Thanksgiving.
UNIDENTIFIED PERSON #2: Biggest St. Patrick's Day sale ever.
SELYUKH: But little by little, competition stacked up. Joe Feldman is an analyst at Telsey Advisory Group.
JOE FELDMAN: I mean, there's a lot of other places you can get party supplies, whether it's at Walmart or Target or Amazon or the dollar store or even the grocer's.
SELYUKH: Now, even Home Depot is in the giant plastic skeleton game, not to mention Spirit Halloween chomping at Party City's most important season.
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UNIDENTIFIED PERSON #4: Halloween - be flirty, be scary. Thousands of styles...
SELYUKH: Add to that some peculiar challenges of a party store, like the helium shortage - a global problem that just won't go away - for years now making Party City's big balloon business a bit of a trick. Then, things got really dicey during the pandemic.
FELDMAN: Social gathering really ground to a halt for, like, two years, right? Party City is the place you go for social gathering supplies.
SELYUKH: These days, inflation is the latest scare. People have been looking a bit more closely at their party budgets. And through it all, Party City has been carrying a big burden - almost $2 billion in debt. And that's why it's filed for bankruptcy - to get its debt under control. This story has played out with many once-unrivaled chains.
DAVID SILVERMAN: Toys "R" Us is an example, Neiman Marcus, J. Crew.
SELYUKH: David Silverman is a senior director at Fitch Ratings, listing off some notable bankruptcies of recent years. This traces back to the mid-2000s, when private equity firms swept through the retail world, taking prominent companies private in so-called leveraged buyouts, loading them up with debt.
SILVERMAN: The plan is for the company to grow and use the cash flow to pay down debt, and that just simply hasn't happened in the case of Party City.
SELYUKH: To be clear, Party City is not going out of business, but its sagging sales have made its debt untenable. Silverman says the good news is that the company does seem to have a clear plan - a deal not only to restructure and shed some debt, but also an infusion of money to stay open through the bankruptcy. The company has more than 800 stores and seems to suggest that it may close at least a couple dozen of them. The big question is whether it will stop there.
Alina Selyukh, NPR News. Transcript provided by NPR, Copyright NPR.
