- [Narrator] Think of Party City like this balloon
from one of its stores.
When it IPOed in 2015, the company was floating.
Now not so much.
Shares are down 99%
and the company has filed for bankruptcy.
Party City's downfall was caused by a unique set
of circumstances, changing consumer behaviors,
inflation, and ballooning helium prices.
So what went wrong?
Party City opened the doors to its first store in 1989,
but the Party City shoppers know today
really started to take shape in 2005
when it was bought by two private equity firms.
And then years later by another firm.
- They added businesses to them,
they acquired other suppliers,
and they also expanded the store footprint tremendously.
- [Narrator] Under new owners, Party City's party grew.
Revenue increased and debt decreased.
Plus, it gained about 90 stores.
In 2015, Party City went public again.
- These private equity firms were also acquiring businesses
and adding to the company
and also growing the store footprint.
So all of that made it more attractive as a public company.
- [Narrator] While Party City share price fell
after the IPO, it stayed steady until about 2019.
On an earnings call in May of that year,
Party City announced about 5% of its stores were closing.
- [Jim] We have decided to close approximately 45 stores
over the course of 2019.
- [Narrator] One Driving factor, declining balloon sales.
Metallic balloon sales had fallen 8.4% due to...
- A global helium shortage.
- The helium shortage, they say it's getting too expensive
to fill up all those balloons.
- Helium's pretty important for Party City
because a lot of the traction of the retail chain
for customers is the balloons that you can get.
- [Narrator] The US' helium shortage wasn't new.
It became a problem in the late 2000s,
but by 2019, it was deflating Party City sales.
Helium is sourced as a byproduct
from natural gas extraction,
but a lack of new natural gas infrastructure
coming online in the US hurt supply.
That drove up prices of the noble gas,
and Party City's stock fell.
Then in the fall of 2019,
the company was dealt an even bigger blow.
- [Jim] Overall, the Halloween season
was below expectations.
- [Narrator] Revenue in October,
a key month for the company
declined 7% from the year before
and sales at its Halloween only stores, Halloween City,
dropped about 20%.
- Party City faced a lot of competition,
for example, from Spirit Halloween.
And then of course, in the last 20 years,
consumers have been shifting more to online shopping,
so that's also hurt them.
- [Narrator] In recent years,
the company has faced many of the same challenges
affecting other retailers like changing consumer habits
due to the pandemic and inflation.
The pandemic led to smaller gatherings
and less demand for Party City's products.
- Even even though the pandemic is coming to an end,
what the executives at Party City have said is that
they're still finding,
that people are still having smaller gatherings
than they used to.
- [Narrator] So as a result,
sales and the company's stock price have continued to fall.
Then last December, Party City hired restructuring advisors
to evaluate how best to handle its lack of cash.
On January 6th, people familiar with the matter
said the retailer was planning to file for bankruptcy.
Party City shares dropped 57% to just 15 cents.
- It definitely indicates that investors think
that you're probably gonna at least file for bankruptcy
and maybe not survive at all as a company.
- [Narrator] On January 18th,
the company officially filed for bankruptcy.
Party City said, it plans to reduce its 1.4 billion in debt
and exit bankruptcy within four months.
The company is also evaluating its store footprint,
including identifying underperforming stores.
It's already closed 28.
Party City declined to comment further.
- Party City, when they come out of bankruptcy,
if things go according to plan
should shed a lot of their debt.
And what that means is that interest that they pay
will be a lot lower
and lowered than it has been for years.
- [Narrator] Party City's future success
will depend on whether the company can emerge
from bankruptcy and develop a strategy to restart the party.