Dollar store chains are already seeing a lift from Party City closing.
Tyler Sizemore/Albany Times Union via Getty Images
The collapse of Party City is giving dollar store chains a welcome lift.
Even with concerns about tariffs and inflation, retail earnings have shown shoppers continue to spend on celebrations.
Dollar Tree, Five Below, and Dollar General each reported good sales of party supplies.
Call it retail's circle of life.
As in nature, the demise of one creature can unlock resources that benefit others in the ecosystem.
Most recently, the collapse of Party City has been giving dollar store chains a welcome lift, especially as the economy heads into a period of uncertainty.
"There's been a lot of competitors closing, many not in our space directly, but some that were like, for instance, with Party City moving out," Dollar General CEO Ted Vasos said on an earnings call earlier this month.
"We went in and rebalanced the inventory in our p0pshelf stores, bringing in more party, more occasions, more toys, things that will go directly for that consumer that is probably left looking for a place to shop," he added.
Five Below CEO Winnie Park also said this month that her chain was dedicated to "help our customers play, live, give, and celebrate."
"We also help our customers celebrate milestones like graduations and micro and macro holidays from Valentine's to New Year's Eve and everything in between," she said.
Dollar Tree interim CEO Michael Creedon echoed the idea on an earnings call Wednesday.
"The holidays are what drives Dollar Tree. I don't care what your income is, there's no better place to celebrate the holidays, or celebrate in general than Dollar Tree," he said. "No one should go anywhere else because we offer the best value, we've got the convenience."
Earnings from other companies such as Target and Walmart in recent quarters have shown that even with concerns about inflation, shoppers continue to spend to celebrate special occasions.
With tariff uncertainty in the mix, parents may start deal-hunting for lower prices for their kid's birthday party.
Corporate bankruptcies hit their highest level in over a decade in 2024, according to S&P Global.
There were 694 bankruptcy filings in 2024, S&P said.
Delinquency rates on business and personal loans also climbed last year, Fed data shows.
Corporate bankruptcies rose to a 14-year peak in 2024, jumping to the highest level seen since the years following the Great Financial Crisis, according to data from S&P Global.
A total of 694 US companies filed for bankruptcy last year, the intelligence firm said in a report on Monday. It represents the highest number of bankruptcies in the corporate world since 2010, when 828 firms filed for bankruptcy.
Corporate bankruptcy filings in 2024 rose to their highest level since 2010, per S&P Global data.
S&P Global Market Intelligence
Filings for the year were up 9% compared to levels in 2023, and up 86% compared to levels in 2022, when just 372 firms filed for bankruptcy protection.
Consumer discretionary was the most distressed sector in 2024, with 108 companies filing for bankruptcy. That was followed by industrials and healthcare industries, where 88 and 65 firms filed for bankruptcy, respectively.
"The consumer discretionary sector has been particularly susceptible to economic headwinds, even with strong overall US retail sales activity, as consumer buying trends have shifted and budgets have tightened due to inflation," the report said.
Higher levels of debt distress also reflected the strain of high debt balances, as well as higher rates in the economy broadly, the report said.
Over 30 companies that filed for bankruptcy last year had more than $1 billion in liabilities at the time they filed, according to a list compiled by S&P Global. Companies on the list included high-profile bankruptcies like Party City, Spirit Airlines, and Red Lobster.
Meanwhile, credit-rated nonfinancial US firms held a record $8.45 trillion worth of debt in the third quarter of 2024, the firm said.
Central bankers have lowered interest rates in recent years, but borrowing costs for many consumer and business loans remain elevated.
The average yield on seasoned AAA-rated corporate bonds was 5.2% in December, about double the rate in December 2020, according to Moody's data.
The average yield on seasoned AAA-rated corporate bonds was north of 5% in December, according to Moody's.
Moody's/Federal Reserve
Signs of debt distress have increased in recent years as the impact of higher rates continues to work through the economy.
The delinquency rate on business loans held by commercial banks rose to 1.16% in the third quarter of 2024, the highest level since the pandemic. The delinquency rate on consumer loans, meanwhile, rose to 2.73% in the third quarter, the highest level in 12 years.
Shoppers of almost all income levels have been watching their spending in 2024.
Trouble for a trio of retailers at the tail end of 2024 is a sadly fitting end to a tough year for retailers.
Home storage chain The Container Store filed for Chapter 11 bankruptcy on Sunday. The retailer plans to reorganize and its CEO said that the company "is here to stay," but it said in May its full-year consolidated net sales dropped almost 20% year-on-year, and in October that second-quarter sales on the same basis fell 10.5%.
A day earlier, Party City said it would wind down operations and close all of its stores. That's on top of Big Lots, which said last Thursday it would start store-closing sales at all of its locations after its planned sale to a private equity firm fell through.
The few days of bad news caps a rough year for many retailers. Over 2,000 stores have closed this year in the US, by Business Insider's count.
Among the companies that have shuttered stores are drugstore chains CVS and Rite Aid, Family Dollar, and convenience store chain 7-Eleven.
Even some big-name chains that aren't closing stores are still having trouble. Starbucks' sales fell in the latest quarter, showing that new CEO Brian Niccol — brought in abruptly to help revitalize the company — has plenty to address at the chain in 2025.
Starbucks store employees have told BI that the coffee chain has operational issues to work out, from not scheduling enough workers at busy times to finding a better way to fill mobile orders.
Big Lots, Party City, and The Container Store all have pointed to recent economic factors, namely inflation and consumers who are less willing to spend.
In its statement on Saturday, for instance, Party City cited "an immensely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors" in explaining the decision to wind down operations.
Satish Malhotra, CEO of The Container Store, referenced a "challenging macro-economic environment" in an email to customers this week.
Big Lots, meanwhile, has been saying for months that consumers were buying fewer couches, dining room sets, and other high-priced home furnishings. The chain saw "a significant consumer pullback in big-ticket items, particularly within the furniture and patio furniture categories," CEO Bruce Thorn said during an earnings call in June — the last one that the company hosted before announcing its now-scrapped deal to sell itself to Nexus Capital Management.
Inflation has decelerated this year for many items, yet shoppers are still cautious about what they buy, and prices for many items are still proportionally higher than before the pandemic. Many low-income consumers are having trouble stretching their paychecks to cover expenses, a development that has hurt Dollar General and other dollar stores.
More affluent consumers have also slowed their spending, turning away from stores where they have to pay full price and toward off-price chains like Nordstrom Rack as well as store-brand groceries at Walmart.
Even Target reported last month that many of its customers were sticking to buying essentials and shying away from impulse buys and more expensive items, leading the big box chain to cut its forecast.
So far, the outlook for 2025 isn't great. Advance Auto Parts and Walgreens have plans to shut 1,200 stores between the two chains, for example.
To be sure, all three retailers who reported bad news over the last few days faced challenges well before this month or even this year. Big Lots has been closing stores since last year. Party City filed for bankruptcy in January 2023. And The Container Store has reported quarterly drops in same-store sales for several consecutive quarters.
But if shoppers remain value-conscious and stick to stores they perceive as offering the best deals going into 2025, retailers could continue to have a tough time in the new year.
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Party City's CEO told employees the specialty retailer is "winding down" operations, CNN reports.
The company was impacted severely by the COVID-19 pandemic and never fully recovered.
The company spent much of the past two years in bankruptcy proceedings and has closed 80 locations.
Party City's balloon is out of air.
CEO Barry Litwin, who took the job in August, told Party City's corporate employees on Friday that operations were "winding down" immediately, CNN reported.
The news follows reports last week that the company was contemplating a second bankruptcy in two years as debt continued to weigh on profitability.
A spokesperson for Party City did not immediately respond to a request for comment from Business Insider.
Litwin told employees the company had done what it could to avoid shutting down but that, "unfortunately, it's necessary to commence a wind-down process immediately," CNN reported.
Party City navigated a pre-pandemic shortage of helium for balloons, securing a new supply source.
It was impacted severely by the COVID-19 pandemic, when lockdowns and social distancing ended many celebratory gatherings, and other mass retailers like Amazon, Walmart, and Target stepped up their party supply offerings.
