Party City is going out of business

New York CNN  — 

Party City is closing down all of its stores, ending nearly 40 years in business, CNN has learned.

CEO Barry Litwin told corporate employees Friday in a meeting viewed by CNN that Party City is “winding down” operations immediately and that today will be their last day of employment. Staff were told they will not receive severance pay, and they were told their benefits would end as the company goes out of business.

“That is without question the most difficult message that I’ve ever had to deliver,” Litwin said at the meeting, which was held on a video conference call.

Party City’s “very best efforts have not been enough to overcome” its financial challenges, he added, resulting in the company’s collapse. Litwin said the company struggled to contend with inflation, which sent the company’s costs higher and dragged down 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 said. “Unfortunately, it’s necessary to commence a winddown process immediately.”

Also on Friday, some of Party City’s store employees received letters that the company would close down stores on February 28, at which point store staff 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,” the letter stated.

Party City didn’t respond to CNN’s request for comment.

The New Jersey-based company announced Litwin as its new CEO just four months ago. In a LinkedIn post he wrote when he was hired, he said the company’s “main priority is to strengthen our financial health, and there is work ahead of us.”

Party City exited bankruptcy a month after Litwin’s arrival. It had declared bankruptcy in January 2023. The company had struggled to pay off its $1.7 billion debt load, and it was able to cancel nearly $1 billion in debt by going bankrupt. It also managed to keep most of its more-than 800 stores open, although it closed more than 80 locations between the end of 2022 to August 2024, according to its most recent financial documents.

But it still had more than $800 million in debt to overcome, which strained earnings this year.

The news of the company’s impending collapse began to trickle out among the company’s corporate staff over the past couple weeks.

Party City’s product development team was recalled two weeks ago from its yearly trip with vendors and told to return home immediately, 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 team was told the company believed 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 doors to the front entrance. In an email sent to staff on December 11, the company’s security team told employees they needed to provide a one-day heads up to gain access to the building, and they were instructed: “Do not allow anyone to tailgate when entering the building” to avoid letting people in the door who did not have badge access.

On internal Microsoft Teams chats shared with CNN, employees Thursday expressed fury at the lack of communication as news spread of the recalled product development staff. Others had learned that notifications were sent out to store managers that all Party City locations’ doors would be shut in February.

Employees were caught off guard, because management hadn’t mentioned any potential financial trouble at recent town hall meetings. The employee said management had expressed optimism about Party City’s overall business.

On the call with staff Friday, Litwin apologized for the lack of communication.

“We recognize the flow of communication has not been how we typically handle sensitive matters like this,” Litwin said.

Detailing corporate employees’ benefits and severance, Party City’s Chief Human Resources Officer Karen McGowan broke down in tears several times on the short video conference call.

“I certainly know this is a lot to take in,” McGowan said before she paused and teared up. “My apologies.”

Party City is the largest party supply store in the United States. The company had approximately 6,400 full-time and 10,100 part-time workers as of 2021.

The company, which sells balloons, Halloween costumes and other party goods, has stumbled in the face of growing competition from e-commerce sites and pop-up concepts like Spirit Halloween. Competition from big-box retailers like Amazon, Walmart, Costco and others also crushed smaller chains.

It also had to contend with rising costs during the pandemic and a helium shortage, which hurt its crucial balloon business.

The chain joins a growing list of retailer bankruptcies this year as customers cut back on discretionary spending amid the rising cost of living. Notably, Big Lots announced Thursday it was starting “going out of business” sales at all of its locations after a plan for a private equity firm to rescue the bankruptcy retailer failed.

Major chains are on track to close the highest number of stores in 2024 than in any year since 2020, according to Coresight Research.

CNN’s Ramishah Maruf and Nathaniel Meyesohn contributed to this report.