Dive Brief:

• As part of an effort to wind down underperforming stores, Party City is planning to close around 22 stores, with more possibly to come, according to court documents filed Thursday. New York-based A&G Real Estate Partners will auction off 12 of the locations, while another 10 are slated to close later in February, provided there are no objections.
• The company filed for Chapter 11 bankruptcy in January. Party City cited a big pandemic-driven drop in consumer spending on the retailer’s primary products – costumes, decorations, balloons and other merchandise to enhance in-person celebrations – as a contributing factor.
• Party City in January also asked the court to release the company from 28 other store leases in 13 states. The company said in court documents that the stores were performing so poorly that it closed and vacated those locations prior to filing for bankruptcy, and is now looking to exit its rental obligations at the properties.

Dive Insight:

Party City wants to shrink its retail footprint by backing out of leases as part of its bankruptcy restructuring efforts.

"Our work on our lease portfolio is moving very quickly, with a plan for us to exit locations that do not meet the key financial metrics required for our go-forward fleet,” Marc Ehle, Party City's executive vice president of enterprise operations, said in a statement.

The 12 stores already up for auction are located in New York, Missouri, Michigan, Oklahoma, Oregon, and West Virginia. The properties range in size from 9,000 to 28,000 square feet, and they include freestanding, power center, strip center and street locations. The firm said it’s already seeing interest from local and specialty retailers and non-retail tenants, like healthcare services.

According to court filings, New Jersey-based Party City had 770 company-owned stores and 53 franchised stores when it filed for bankruptcy. The company closed around 150 stores from 2019 through the first nine months of 2021.

Parent company Party City Holdco reported total consolidated operating revenues of approximately $2.17 billion for the fiscal year ending Dec. 31, 2021. The company’s retail segment accounted for about 81.5% of total revenues. The company also reported holding $1.4 billion in debt at the end of 2021. In its Chapter 11 filing, Party City said it has liabilities and assets of between $1 billion and $10 billion. The company hasn’t yet reported its Q4 or 2022 full-year earnings.

Party City’s franchised stores and subsidiaries outside the U.S. are not part of the ongoing bankruptcy case. The company said it expects to exit bankruptcy protection in the second quarter.