The past few years have been brutal for retailers. An astounding 7,327 retail stores closed their doors in 2024, with several high-profile chains filing for bankruptcy.
Joann filed for bankruptcy in March 2024 and initially managed to keep its doors open. Now, it’s making plans to close 500 stores across the U.S.
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Big Lots, meanwhile, filed for bankruptcy in September 2024 on the heels of disappointing sales.
Related: Popular bankrupt retail chain finds buyer for brand and assets
Sticky inflation forced many consumers to curb their spending in 2024. By that point, stimulus checks had long run out, leaving consumers with less discretionary funds.
Stubbornly high interest rates also influenced spending, as borrowing became less desirable for consumers. The Federal Reserve finally lowered its benchmark interest rate in mid-September.
But by then, for a lot of struggling retailers, the damage had already been done.
Party City couldn’t hang on
Party City’s sales got stuck in an extended slump. The retail chain first filed for bankruptcy in early 2023 but managed to maintain its footprint by restructuring its debt.
By late 2024, it became clear that the brand was no longer viable. The company was deep in debt to the tune of $400 million and didn’t see a way out.
Related: Popular discount retailer files bankruptcy, closes all stores
Party City filed for bankruptcy for the second time in December 2024 and announced plans to wind down operations. It also said that its 700 stores would be closing in short order, and liquidation sales began following that announcement.
However, the brand isn’t totally dead. In January, Party City announced that it had entered into an agreement to sell its intellectual property and related wholesale operating intangible assets to New Amscan PC, LLC, an affiliate of Ad Populum, LLC.
Ad Populum is a leader in pop culture merchandise, and it may seek to revive the Party City brand.
Image source: Shutterstock
Party City lease auction garners interest
While New Amscan is buying Party City’s IP and wholesale operations, there’s still the matter of the retail chain’s 700 store leases, which span 45 states.
So far, popular discount chains Dollar Tree and Five Below have emerged as the top bidders for those leases. Dollar Tree successfully bid on 148 leases, while Five Below bid on 44.
Other notable names in retail, including Barnes & Noble and Burlington, also bid on Party City’s leases. A hearing is scheduled for late February, at which point it’s expected that these lease transfers will be approved.
Related: Formerly bankrupt retailer sells assets, reopens operations
Party City said that the lease auction process generated about $14.5 million in gross proceeds. But since efforts to monetize the store’s remaining leases are ongoing, that number could climb.
But hundreds of those leases have yet to be scooped up. And that may have commercial real estate investors spooked, and for good reason.
The vacancy rate among retail spaces is 4.1% nationwide, according to JLL. That’s a near-record low for the sector.
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- Former bankrupt craft beer chain adds locations after closings
Still, an impressively low vacancy rate doesn’t mean that retail spaces will get scooped up quickly each time they become available. And as more retailers face steep competition from big-box chains and online giants like Amazon, that vacancy rate is likely to climb as businesses seek to sell more inventory online.
Meanwhile, the Party City legacy still hangs in the balance as Ad Populum assesses its next steps. In today’s economic climate, it’s questionable as to whether the in-person shopping experience makes sense for party supplies.
Prior to its bankruptcy filing, Party City had to contend with the likes of Amazon, as well as Oriental Trading Company, the nation’s largest direct retailer of value-priced party supplies. Neither is going away anytime soon.
Consumers have become increasingly comfortable doing their shopping online – a trend sparked by the pandemic and the stay-at-home orders it brought about. Given the ease of procuring party supplies over the internet, it’s unclear as to whether the Party City in-store business model remains viable.
Of course, the one area where consumers might prefer the in-store experience is clothing – or, in the case of Party City, costumes. But with Spirit Halloween popping up in ubiquitous fashion each fall, there’s a world of competition there, too.
Completely rethinking the Party City model may be its new owner’s best course of action.
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