Party City is closing all of its stores after nearly 40 years in business, CNN has learned.
CEO Barry Litwin informed corporate employees in a meeting viewed by CNN on Friday that Party City is “winding down” operations immediately and that today is their last day of work.
Employees were told they would not receive severance pay and that their benefits would end when the company went out of business.
“That is without a doubt the most difficult message that I have ever had to deliver,” Litwin said during the meeting, which was held via video conference call.
Party City’s “very best efforts have not been enough to overcome” its financial challenges, he said, resulting in the company’s demise. Litwin stated that the company struggled to deal with inflation, which increased costs and reduced consumer spending.
“It’s really important for you to know that we’ve done everything possible that we could to try to avoid this outcome,” Litwin told you. “Unfortunately, it’s necessary to commence a winddown process immediately.”
Also on Friday, some Party City store employees received letters informing them that the company would close its stores on February 28, at which point their jobs would be terminated.
“Although Party City believes these closings are in the best interest of the company, we regret that we have had to take this step and thank you for your valued contributions and service to the company,” according to the letter.
Party City did not respond to CNN’s request for comment.
Bankruptcy and collapse
Litwin was named the company’s new CEO only four months ago. When he was hired, he wrote on LinkedIn that the company’s “main priority is to strengthen our financial health, and there is work ahead of us.”
A month after Litwin arrived, Party City emerged from bankruptcy. It declared bankruptcy in January 2023. The company had struggled to pay off its $1.7 billion debt load and was able to cancel nearly $1 billion in debt by declaring bankruptcy.
It also managed to keep the majority of its more than 800 stores open, despite closing more than 80 locations between the end of 2022 and August 2024, according to its most recent financial statements.
However, it still had more than $800 million in debt to repay, which hampered earnings this year.
An emotional ending
Over the last few weeks, word of the company’s impending collapse spread among its corporate staff.
According to a former Party City corporate office employee who wished to remain anonymous because they were not authorized to speak to the media, the company’s product development team was recalled from its annual vendor trip two weeks ago and told to return home immediately.
The team was informed that the company thought the trip posed a safety risk because Party City had stopped paying its suppliers.
All corporate employees were sent home on December 10. Security at corporate headquarters locked the front entrance. In an email sent to employees on December 11, the company’s security team informed them that they needed to provide a one-day notice to gain access to the building, and they were instructed: “Do not allow anyone to tailgate when entering the building” to avoid allowing people in who did not have badge access.
Employees expressed fury Thursday in internal Microsoft Teams chats shared with CNN about the lack of communication as news of the recalled product development staff spread.
Others discovered that notifications had been sent to store managers informing them that all Party City locations would close in February.
Employees were caught off guard because management had not mentioned any potential financial problems in recent town hall meetings. The employee stated that management was optimistic about Party City’s overall business.
Litwin apologized for the lack of communication during a staff call on Friday.
“We recognize the flow of communication has not been how we typically handle sensitive matters like this,” Litwin told reporters.
Karen McGowan, Party City’s Chief Human Resources Officer, broke down in tears several times during the short video conference call while discussing corporate employee benefits and severance.
“I certainly know this is a lot to take in,” McGowan said, pausing to cry. “My apologies.”
Party’s over
Party City is the biggest party supply store in the United States. As of 2021, the company employed approximately 6,400 full-time and 10,100 part-time workers.
The company, which sells balloons, Halloween costumes, and other party supplies, has struggled in the face of increased competition from e-commerce sites and pop-up stores such as Spirit Halloween. Big-box retailers such as Amazon, Walmart, Costco, and others have also crushed smaller chains.
It also had to deal with rising costs during the pandemic and a helium shortage, which harmed its vital balloon business.
The chain joins a growing list of retailers that have gone bankrupt this year as customers reduce discretionary spending due to rising living costs.
Notably, Big Lots announced Thursday that it would begin “going out of business” sales at all of its locations after a private equity firm’s plan to rescue the bankrupt retailer failed.
According to Coresight Research, major chains are on track to close more stores in 2024 than any other year since 2020.