Party City Holdco, Inc. is an American publicly traded retail chain of party stores founded in 1986 in East Hanover, New Jersey, by Steve Mandell. Party City Holdings Inc. is the parent company of Party City. Is Party City out of business?
The company, headquartered in Elmsford, New York, is the largest party goods retailer in the United States, Canada, and Mexico, with over 900 company-owned stores. They also have franchised store spots under the Party City, Halloween City, Toy City, and Factory Card & Party Outlet brands.
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what do party stores have?
Mandell decided to specialize in business when he went out to pursue his long-held dream of owning his retail operation. After scraping together $125,000, he opened Party City, a 4,000-square-foot (370-square-meter) store in East Hanover, New Jersey.
Party City stores are primarily found in the eastern United States but also in 37 other states. There are also two stores in Portugal and five in Puerto Rico and Spain. A typical Party City store is 10,000 to 12,000 square feet and stocks approximately 30,000 items. Even though Halloween accounts for up to a quarter of annual sales, Party City is constantly promoting seasonal holidays, from traditional occasions like New Year’s Eve to modern marketing-driven events like Father’s Day and Super Bowl Sunday.
Besides, stores sell a wide range of merchandise for birthday parties, events, weddings, bridal showers, and baby showers. Costumes, gift wraps, balloons, greeting cards, personalized invitations, tableware, catering supplies, candy, and party favors are available. Party City also sells less apparent items like fog machines, a popular Halloween special effect.
impact of helium on party stores
Due to a global helium shortage, Party City has closed 45 stores. The New Jersey-based party supply company has yet to state which of its 870 locations will be affected. CEO James Harrison noted that the company typically closes 10 to 15 stores annually.
While helium is one of the most abundant elements in the universe, extracting it is costly and time-consuming. Helium, a light gas, must be captured quickly, or it will float into space. It can be removed from the ground or natural gas. Seventy-five percent of the world’s helium comes from Qatar, Wyoming, and Texas, but reserves in the United States are reducing and may need to be restocked.
“The problem is that helium is being consumed more quickly than it can be manufactured these days,” stated Anders Bylund of the Motley Fool. Party City contributes little to this trend because most global consumption is used to cool down medical devices and clean rocket fuel tanks. Helium shortages fluctuate over time and across geographical markets, but anywhere from 50 to 200 of Party City’s 850 stores don’t have any helium in their tanks at any time. Helium is a cooling agent in MRI machines, rocket cleaners, airbags, and microscopes, among other technologies. Scientists are urging companies to begin recycling helium whenever possible.
Some organizations aimed to increase helium production, but this only happened in 2020 or 2021, resulting in a shortage that could last for many months.
what happened to party stores?
Most people believe that Christmas is the only season that matters to merchants. However, it depends on what you’re offering. A holiday-filled November and December are crucial for many retailers. Halloween is the occasion that generates the most revenue for Party City. Additionally, in 2019, the merchant of party supplies reported its financial performance for October was disappointing. The month’s payment was $432.6 million, 7% less than in 2018. The stock dropped sharply 67% in a single day. “They were so low, it was shocking,” Jan Kniffen, CEO of J. Rogers Kniffen WWE, said. “And I think that was partly due to them telling the world how bad Halloween was, so everyone realizing that if you can’t even win in a party business on Halloween, it’s difficult to win.”
Party City did not respond to inquiries about its operations, although it did address worries about a global helium shortage. In each of the first three quarters of 2019, analysts predict that the scarcity reduced sales by 2%. Party City claims that it anticipates a stronger Halloween next year. But the industry is dealing with several issues, including the fallout from the helium shortage and shifting consumer tastes.
why party city out of business in 2022-2023?
Party City Holdco Inc. reported a larger-than-expected first-quarter loss as problems with the supply chain and inflation ate company profits. Party City continues to be committed to an “aggressive” rollout of its next-generation shop prototype this year. Despite the current challenges, the firm expects that they will persist through 2022. The retailer added 35 next-generation stores during the first quarter, bringing the number of sites using the new model to 130.
About one-third of the fleet is expected to be converted by the end of 2022. Party City aims for 100 to 125 next-gen remodels or openings for 2022. In comparison to the same quarter a year
The company’s net loss increased to $26.9 million, or $0.24 per share, for the quarter that ended on April 3. Analysts had predicted a loss of $0.12 per share; hence the adjusted loss of $0.22 per share was higher.
Party City continues to face difficulties in the helium market. In addition, rising transportation prices and the omicron version reduced celebrations early in the year. An American facility that generates 8% of the world’s helium has been experiencing operational problems since last year. The complete shutdown took place in January 2022. There have also been issues with several international helium production facilities.
As of March 31, 2022, there were 759 corporate Party City locations, up from 751 the previous year. “As expected, our bottom-line results were impacted by higher-than-expected freight and commodity cost pressures that ramped later in the quarter,” Weston said. “As we look ahead to the end of 2022, we expect supply chain and higher inflation economic uncertainty to persist, reflected in our updated prospects.” “As we navigate this near-term cost turbulence, we are being very thoughtful with our mitigating pricing actions and delivering an improved customer experience.”
party city expectations in 2023
“We conveyed third quarter results that were widely in line with our goals against a quantitative backdrop that has our main clients facing significant inflationary pressures,” said Brad Weston, CEO. “Despite the temporary cost downside risks that continue to weigh on our bottom line, our transformation work will drive better results compared to the pre-pandemic period as we progress on our brand, inventory control, supply chain, and IT systems and make a meaningful impact.”
While overall Halloween sales figures throughout the company were up year over year, Mr. Weston continued, “They came in at the lower end of our forecasts as macro headwinds impacted customers’ capacity and willingness to raise their spending on Halloween celebrations.” Looking ahead, the current macro environment will continue. Thus we are acting to position the company for the long term and in this environment. Given the challenging climate, we will continue advancing our transformation agenda while addressing structural cost opportunities and improving operational efficiencies.
They have concentrated on reducing spending by $30 million, and work has already begun to reach the goal in 2023. This includes a 19% decrease in the corporate workforce due to a mix of position eliminations and a shortage of filling many open positions. They regret the effect on the impacted personnel. Notably, the company is carefully and deliberately carrying out these activities to ensure that it advances toward its profitability targets without sacrificing its potential for long-term growth.
conclusion
Party City is the largest party retailer in North America, with over 850 locations. According to the most recent financial disclosure, Party City has a 49.0% chance of bankruptcy. This is 18.39% more than the cyclical consumer sector and 82.7% more than the specialty retail industry. Party City shares have lost more than 70% of their value this year, as concerns about inflation have trumped any post-lockdown zeal for social occasions. The company has more than $1.2 billion in debt, most of which are junk-rated notes.