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For nearly 40 years, Party City served as a destination for celebration planning as well as selling balloons, décor and Halloween costumes.

But the mood was far from festive at the specialty retailer’s headquarters in Woodcliff Lake Dec. 20. On Friday, CEO Barry Litwin informed corporate staffers the company will wind down operations immediately, and they were being let go at the end of the day.

Litwin also told workers they will not receive severance pay and their benefits will come to an end after the company goes out of business.

Employees received the news via a video call. Earlier this month, Party City told its team they could work remotely for the rest of the year, former employees told NJBIZ.

In a video posted on TikTok apparently showing the virtual meeting, Litwin explained inflation caused costs to rise and dragged down consumer spending.

“While we have worked extremely hard to navigate these headwinds and carefully manage our financial position in hopes of turning our situation around, our very best efforts have not been enough to overcome these challenges,” Litwin said in the clip.

“We’ve worked tirelessly to find a path forward that would allow us to remain in business, but ultimately we’ve been left with no other choice but to begin winding down Party City,” he said. “We wish we had different news to report.”

“This is, without question, the most difficult message I’ve ever had to deliver. And, it’s really important for you to know that we’ve done everything possible that we could to try to avoid this outcome,” he said.

Closing sales begin

According to Litwin, closing sales began Dec. 20 at Party City’s more than 750 stores and will continue over the next several weeks. In addition to the corporate office, the company’s distribution centers will go dark too, he said.

Litwin is regarded as a turnaround expert in the retail industry. He also apologized for the lack of communication leading up to the announcement. This is not how “we typically handle sensitive matters like this,” he said.

“We all know this is not the ending that we imagined and it’s a lot to take in. For what it’s worth, know that your commitment to the company and your contributions are incredibly valued, and you did play a critical role in helping us deliver on our mission to make Party City a business that has been loved by so many, for so many years,” he said.

CNN broke the news Party City would go out of business. The outlet reported some of the company’s retail employees received letters that stores would shutter Feb. 28, 2025, and they’d be out of work after that.

Party City did not respond to a request for comment.

Take two

A day after Litwin’s announcement, Party City filed for Chapter 11 bankruptcy for the second time in two years.

In a Dec. 21 petition in U.S. Bankruptcy Court for the Southern District of Texas, the company said it will “implement an orderly wind down of its business and liquidation of its assets.”

Party City is putting its assets up for bidding. But if there’s no sale, the company expects to “initiate store closing sales to liquidate all of the Party City Group Cos.’ retail and wholesale inventory and locations,” according to the filing.

The retailer listed assets of between $1 billion to $10 billion, along with liabilities of $1 billion to $10 billion. Party City also said it has between 10,000 and 25,000 creditors.

The company expects to retain more than 95% of its 12,000 store employees to assist with the wind-down process, Party City said in a separate press release. The chain touts discounts of up to 50% off its entire inventory during closing sales.

Debt load follows

Reports began surfacing earlier this month that Party City could possibly pursue a second bankruptcy. Sources told Bloomberg the company was behind on rent at some locations and running out of cash.

After emerging from bankruptcy in September 2023, Party City still had a debt load of more than $800 million. The sum has continued to drag down profits and strain liquidity.

Litwin took the helm of the struggling company in August, just nine months after it exited Chapter 11. The company came out of the process with a reduced footprint of 750 stores, strengthened capital structure and improved liquidity.

Founded 38 years ago in East Hanover, Party City is the largest retailer of party goods in the U.S., Canada and Mexico.

When the company filed for bankruptcy protection in January 2023, it had about 820 stores (770 owned) and about $1.8 billion in debt. As part of its restructuring agreement, the retailer wiped away nearly $1 billion in debt, renegotiated lease terms and closed more than 60 underperforming locations.

‘Pure chaos’

In recent weeks, the company’s corporate staff had inklings the holiday season would not be merry and bright at Party City.

A laid-off staffer identified as Hebah Elmiligi discussed the past few weeks at the company in a video posted on TikTok. “It was pure chaos in the office. No one knew what was happening,” she said.

According to Elmiligi, Party City was no longer paying vendors or leases for its locations. Additionally, promotions and campaigns the staff was “working so hard on” were getting canceled, she said.

The company also stopped paying severance to the 181 employees let go from their corporate positions in September, Elmilgi noted. Following the mass layoff, the company was sued for allegedly terminating workers without notice.

According to Elmiligi, Party City recalled its product development team from an annual vendor trip earlier this month over safety concerns, because the company had halted payments to suppliers.

She also said corporate employees were sent home from headquarters earlier this month and told they needed to provide one day’s notice if they wanted to access the building.

“There was no communication … [but] we knew something was going down,” Elmilgi said, adding, “Shame on you, Party City.”

Rough week for retail:

Following its Chapter 11 filing in September and a failed acquisition deal, Big Lots will initiate going-out-of-business sales at all remaining locations. The company will also lay off more than 500 corporate employees – including its CEO. Read more >>