Party City said more than 800 owned and franchised stores across North America will remain open and customers will still be able to shop on the company’s website.
NEW YORK — Party City has filed for Chapter 11 bankruptcy protection after struggling with rising prices and declining consumer spending.
The Woodcliff Lake, New Jersey-based company said its franchise stores, non-U.S. subsidiaries and Anagram’s foil balloon business are not part of the restructuring and will remain core components of its business.
Party City Holdco Inc. said its more than 800 owned and franchised stores across North America will remain open and customers will still be able to shop on the company’s website.
The chain is planning an accelerated restructuring that it says will significantly reduce its debt and free up cash.
The company received a commitment from the Ad Hoc Group for $150 million in debtor-in-possession financing. It states that the funding, which is subject to court approval, will provide enough cash to continue operations.
Shares rose more than 10% before the market opened on Wednesday.
Party City has faced increasing competition from Walmart and Target for years, and increasingly from pop-up stores like Spirit Halloween. That pressure has intensified in an era of rising prices, including for helium used in party balloons, and slowing consumer demand.
“Party City used to be one of the best games in town, but now it’s become something of a managed operation,” said Neil Saunders, managing director of GlobalData Retail. “Party City probably still has a role to play, but the company needs to do a financial restructuring and rethink its approach.”
Saunders believes Party City should consider ways to attract customers, including finding better locations for its stores and improving its e-commerce site.
In November, Party City posted an increase in quarterly losses, reflecting a 3.2% drop in same store sales. Overall sales were in line with expectations, but at a lower level.
In December, the Securities and Exchange Commission warned Party City that there was a risk of delisting from the New York Stock Exchange for failing to maintain an average share price of $1 per share over a 30-day period.
Shares are currently hovering around 40 cents. The company went public in April 2015 at $17 per share and traded up to $22.60.
Party City expects the company’s restructuring to be completed in the second quarter.