Party City reportedly plans to file for bankruptcy
Shares of Party City plummeted on news that the company is planning on filing for bankruptcy.
Video Transcript
DAVE BRIGGS: What really surprised me also in that note was a downgrade within it of Ulta, another company that's been an absolute powerhouse through and out of the pandemic. And we thought there was no stopping them because they appear to be entirely recession-proof. But they downgrade Ulta and cut the price target from $450 to $400-- quote, "tough setup given sales margin overshoot into the slowing macro."
So I was a little bit surprised by that because they crushed it last year, up 20%. My play is Party City, because it appears the party could be over. The stock slumping on news from the "Wall Street Journal" that the retailer is preparing to file for bankruptcy within weeks as a result of dwindling cash and lower sales resulting from higher inflation.
Now, Party City has, according to the report, hired Alixpartners as a restructuring advisor and are in talks with bondholders about converting their debt. The company also has plans to shut down some of its 760 stores.
This follows news in November that the company would lay off 19% of its workforce after disappointing Halloween sales, part of a $30 million cost-cutting project underway. The stock down more than 50% today, down 97% over the last 12 months. This breaks this parent's heart.
I go to Party City often. You know what's underrated there? The plastic cups, which I have about 100 of in my house.
SEANA SMITH: I have those too.
DAVE BRIGGS: Have them for a party, they stick around for weeks, months.
SEANA SMITH: You know, I'm a little bit surprised by this and the fact that Party City is in the position that it's in right now, because if Party City, I'm just speaking straight from a consumer perspective right now, if they were to go under and they, of course, were to file for bankruptcy, there's not a lot of options out there for retailers that are specifically focused on parties.
Yes, you could get things here and there, say, from Target, some of the other larger retailers-- but this focus on parties, especially coming out of a pandemic, was a play that you thought would have performed much, much better. People were placing much more of an emphasis on--
- It'll be interesting to see what retailer does find opportunity there, right? Is it a Target? Is it-- it won't be a Bed Bath & Beyond or something like that. I'm trying to think of other retailers, though, that you go to.
DAVE BRIGGS: Target, Walmart.
- Target, Walmart, I guess maybe Costco, right, has things like that you go to because you're going to buy the party--
DAVE BRIGGS: Membership, though.
- But you have to go to buy the party food, I was thinking, so you're already there. But it's a good--
SEANA SMITH: The balloons.
- The balloons. I guess it's just grocery stores now that you go to for that.
SEANA SMITH: I don't know. I got to figure it out, though.
DAVE BRIGGS: I think maybe one of the final nails was Spirit Halloween. They have 1,500 Halloween stores. That took away a key element from Party city. And they don't have year-round real estate. They just have pop-up real estate so their costs are just so much lower. Josh Shaffer, good to have you, my friend.
