The actual cause of their downfall? They grew too fast for their inventory management to keep up.
In 1998, when producing their 10K report for investors, Party City couldn't provide accurate net inventory numbers.
They weren’t tracking inventory at all their 300 stores, so they had to do the unthinkable. They delayed the release of their updated 10K report for…4 months!
In 1999, NASDAQ was forced to halt trading of their stock, which eventually was delisted.
Their delayed 10K report triggered a massive selloff of Party City stock, which plummeted from $34 to $3 by July 1999–and led to default with creditors.
But they turned around the party.
Facing class-action lawsuits, Party City restored investor confidence by ousting the founder. They raised $10M selling stores to franchisees and secured $37M through stock warrants and loans.
Their comeback was swift:
- Inventory management was fixed
- They were re-listed on NASDAQ
- Ended 1999 with 393 locations.
In 2005, they were acquired by private equity, going public again in 2015 with a supply chain almost entirely vertically integrated.
But just when the party seemed to be getting started…
In 2019, Party City hit $2.35B in revenue, but there’s nothing like a global health crisis to shut down the party. Literally, COVID-19 canceled celebrations and shut down its stores.
See also:
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Inflation hitting 40-year highs
- Helium shortage 3.0 affecting their signature balloons (no really, this is the 3rd global helium shortage in the past 14 years)
Party City filed for bankruptcy in January. Their goal?
To restructure their 1.7B in debt and close underperforming stores.
And they actually did it!
As of October 12, they emerged from Chapter 11 stronger with ~800 stores.
Given that Party City also operates Halloween City seasonal pop-ups, Halloween season can boost or harm their annual sales.
Time will tell if Party City can stay afloat monetizing spooky season 👻
