Party City continues to shrink its physical store footprint as part of its ongoing Chapter 11 bankruptcy case.
The retailer is closing nine additional stores after failing to reach agreements with landlords, A&G Real Estate Partners said last week. The party goods retailer filed for Chapter 11 bankruptcy in January and is looking to shed leases as part of its reorganization. The retailer announced 22 stores would close in February and in January asked to be released from 28 other store leases. A&G has so far put 33 Party City stores up for auction.
As part of the company’s post-bankruptcy plan, Party City said in a regulatory filing that it will seek to go private.
Store leases are now up for auction at locations in Marina, Palmdale and Lodi, California; the Bronx and Staten Island, New York; Noblesville, Indiana; Lancaster, Ohio; Midwest City, Oklahoma; and Walker, Michigan. Bids are due Monday and the auction is set for Friday. The latest locations up for auction range in size from about 10,000 to 21,000 square feet. Some are freestanding, while others are in city streetfront or power center locations.
The company reached $2.35 billion in revenue in 2019. But the pandemic hit Party City hard as most people canceled in-person celebrations, events and gatherings during the early weeks of the global COVID-19 health crisis. The pandemic cost Party City $174 million in EBITDA in 2020, the company said. At the end of 2021, the company said it had $1.4 billion in debt.
Mandatory store closures as a result of lockdown orders, pandemic-related supply chain disruptions and inflation all “consumed vital liquidity, thus limiting the Company’s ability to adequately fund critical growth initiatives,” the retailer said in an 8-K regulatory filing from earlier this month.
One of those growth initiatives includes the company’s strategy to modernize its stores. As of the regulatory filing, Party City said it had opened or remodeled 186 next-generation stores. These stores feature category store-in-stores, “with a balloon shop and customer engagement center as the epicenter,” the retailer said.
At the time of its Chapter 11 filing, Party City had over 800 company-owned and franchised stores. However, the franchised locations are not part of the bankruptcy proceedings. According to regulatory filings, the company has 770 company-owned locations and 53 franchised locations.
A&G, which specializes in lease optimizations and real estate sales, also said Thursday that Michaels and Five Below acquired five Party City leases in an earlier auction pending bankruptcy court approval. Michaels acquired four leases — in Corpus Christi and Dallas, Texas; Alexandria, Louisiana; and Irondequoit, New York — and Five Below acquired a lease in Alameda, California.
In a March announcement about an earlier round of lease auctions, Andy Graiser, A&G’s co-president, said Party City “is working closely with us to maximize the performance of every location in its store portfolio, with a view toward achieving financial metrics that will best support the go-forward fleet.”