Party City files for Chapter 11 bankruptcy, stock bounces

Yahoo Finance Live’s Brad Smith reports that Party City has filed for Chapter 11 bankruptcy.

Video Transcript

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- The party has to come to an end as Party City has officially filed for Chapter 11 bankruptcy. CEO Brad Weston says that today's action is taken to strengthen PCHIs, that's Party City holding balance sheet, and is going to bolster the ability to further advance strategic priorities, and continue to innovate and elevate the customer experience here.

Now some of the issues had shown up ahead of time within the most recent quarterly earnings report that came out from Party City. We talked about this before when this was even something that the company had to weigh. And they had talked about the expectations and the macro pressures impacting customers' abilities and willingness to increase spend on-- Halloween celebrations last year. They had seen people purchasing less balloons on the wholesale side, as well.

And so less balloon purchases, less of the Halloween purchasing, and then additionally within this statement announcing their bankruptcy proceedings that they're going to go forward with, they're actually going to continue moving forward as debtors in possession. That just allows them to continue on paying out some of-- and kind of operating on an as normal basis, if you will, to really cover some of their costs in order to emerge on the other side of this, hopefully, from bankruptcy.

- Brad, you've been to a Party City recently?

- Yeah.

- It's kind of like dollar store, right?

- Yes.

- In a lot of ways. So I think the lesson over the pandemic was if you don't have a digital strategy, and you're something like Ross Stores or TJX, you better be really solid in your execution because in this changing macro environment with all the inflation and the vicissitudes-- not only going up, but also on the downside-- you've got to be able to manage not only your costs that you're selling to consumers, and also your input costs, but also your wages. And that's been the sticky point, and I don't think those are going away any time soon, hence the stickiness of wages, Brad.

- Yeah. You're taking a look at-- of course, that's the max chart for Party City--

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- It's a penny stock.

- Yeah.

- You might expect this.

- They had already received, actually, a delisting notice as well, and so this just adds to that. And we will see exactly how the company positions itself to try and emerge from bankruptcy on the other side of this filing here.