Party City is reportedly renewing talks with creditors to acquire liquidity with help from existing advisers, people familiar with the situation told Bloomberg. The retailer had about $121.5 million of liquidity available at the end of Q3 2022, including about $92 million of availability under asset-based credit lines, against nearly $1.8 billion in debt.
Party City has been faced with both challenges that are affecting retail in general — such as inflation and higher shipping costs — and those that are unique to its business, such as a helium shortage. S&P Global Rating has stated that the retailer’s debt load is unsustainable and that the company may default on its debt within the next year without cost-cutting measures.
Party City is working to ease the pressure by cutting $30 million in costs, including by laying off 19% of its workforce. It also hired a Chief Operating Officer to help revamp supply chain operations and find savings across store efficiency, marketing expenses and information technology contracts.
However, the retailer is still struggling on the sales side. Net sales were down 1.6% to $502.2 million for Q3 2022, which ended Sept. 30. Comparable sales were down 3.2% year-over-year, though they were up 11.2% compared to 2019.
“We delivered third quarter results that were broadly in line with our expectations against a macro backdrop that has our core customer facing significant inflationary pressures,” said Weston in a statement. “Despite the transitory cost headwinds that continue to pressure our bottom line, our transformation work is driving improved results versus the pre-pandemic period as we make progress against our product, inventory management, supply chain and IT systems and infrastructure initiatives.”