Surprising twist in fate of bankrupt Big Lots and Party City
Big Lots and Party City could both be saved from closure.
The two retailers have no connection other than both being in the news this month after saying - within two days of each other - they were going out of business.
But they could also now become sister companies if retail mogul Mitch Modell has his way.
The founder of the Modell's sporting goods chain has bold plans to rescue the two struggling brands.
Last Friday (December 20), Party City bosses shocked staff by telling them it was going out of business and would shut all of its remaining 700 stores by February. The next day the company filed for bankruptcy.
It was the second announcement of a high profile retailer shutting down in as many days.
Big Lots announced on December 19 that it was beginning 'going out of business' sales at all its 963 remaining locations across the US, after a buyer fell through. It had filed for bankruptcy in September and had hoped to keep going once it restructured.
In an exclusive interview with The Real Deal, Modell revealed that he plans to submit formal bids for both companies by the end of the week.
Party City is shutting down all its stores immediately, putting an end to nearly four decades of business
Big Lots is beginning 'going out of business' sales at all its stores across the US, as it prepares to close its remaining locations
Mitch Modell - the founder of the Modell's sporting goods chain - has bold plans to rescue Big Lots and Party City
Although Modell has not yet reached out to either company or enlisted legal counsel, he made it clear he is determined to revive both brands.
'We're gonna get the deal,' Modell confidently stated in the interview.
To spearhead the effort, Modell has enlisted a seasoned team, including Demos Parneros, former CEO of Barnes & Noble, and Larry Meyer, former CFO of Forever 21.
Modell plans to appoint Parneros as CEO and Meyer as CFO of the new venture. Meyer would also take on the role of executive vice president.
Modell, who previously shut down his own 141-store sporting goods chain in 2020, says he expects to have financing secured by the end of the week but declined to provide specifics on his funding sources.
Both Party City and Big Lots have been in financial turmoil for months. Party City, which employs approximately 12,000 people, recently informed its workers that it plans to close its doors by February.
With around 700 stores nationwide, the company has struggled with declining sales, ballooning debt, and increased competition.
Big Lots is also in a similar position, currently in the process of closing about 970 locations and liquidating its remaining inventory.
Despite these bleak circumstances, Big Lots CEO Bruce Thorn has expressed hopes of finding a buyer, and Modell sees an opening to step in and 'save' both brands.
'We want to save every job in the 1,600 stores,' he said, referring to the combined total of Party City and Big Lots locations.
Modell's vision for the two companies involves a dramatic shift in focus.
While Party City would retain its core business of party supplies, Modell envisions Big Lots pivoting toward affordable apparel and sporting goods.
He also plans to introduce low-cost footwear - priced at just $20 - and fresh produce.
The revamped Big Lots would also cut back on certain product categories, including furniture, recliners, and electronics over $10.
Instead, Modell wants to focus on offering 'closeouts' and 'special deals' sourced directly from liquidators.
'We're going to make it a treasure hunt on steroids,' Modell explained, adding that most items would be priced at $10 or less. To keep costs down, Modell plans to source goods directly from factories and farms.
With 75 warehouses stocked with goods ready to ship, Modell is already gearing up for the next phase of his retail comeback. He aims to have a prototype store open by mid-January.
'Everyone - lenders, creditors, bankers, investors - who doubted me is going to see what a store looks like and the excitement it brings,' he said.
Party City was also in the news this week when it emerged the final nail in its the coffin was self-inflicted.
The chain's troubles began with an appraisal conducted by retail consultants Hilco Global, which Party City hired in September.
The firm was tasked with assessing the value of Party City's inventory - the products stocked in its stores and warehouses - as part of a plan to secure more financing.
Bosses had hoped to use a generous appraisal of the value of inventory – from costumes to party hats – would allow the retailer to borrow more money to shore up its finances.
However, in mid-November, Hilco's preliminary report dealt a crushing blow to the business. It said that the value of Party City's inventory had been 'dramatically' slashed compared to previous appraisals.
'This basically means the appraisers thoughts that the various products on store shelves and piled up in warehouses was worthless tat,' a retail expert told DailyMail.com. Since the expert has consulted with Party City, they asked not to be named.
This revelation over the plunge in value of stock was shared by Party City lawyer Christopher Hopkins during a US Bankruptcy Court hearing in Houston on Monday.
After the initial low valuation, Party City's creditors, owed around $162 million, demanded the retailer set aside $50 million in reserve to cover loans.
This pushed the company closer to the brink, court papers show.
The group of creditors took over the business when it first filed for Chapter 11 bankruptcy in February 2023.
When the group were unwilling to plough in more investment and the company could not raise any more external funds the company had to take more drastic action.
This included stopping new inventory orders, delaying rent and vendor payments ceasing new inventory orders and delaying rent and vendor payments, according to court documents.
Although Party City managed to exit bankruptcy in September last year, by December 10 this year its cash pile had fallen below the $50 million reserve its lenders wanted, and it again filed for Chapter 11 bankruptcy.
Lenders 'considered it essential to commence store closing sales before the Christmas and New Year's selling season to maximize the proceeds of such sales for the benefit of all stakeholders,' Party City Chief Restructuring Officer Deborah Rieger-Paganis said in a sworn statement to the bankruptcy court.
It is a bleak time for US retailers as non-essential spending plummets due to soaring living costs.
America's top department store Macy's will close 65 stores within weeks.
Retail experts warn this could be just the beginning, with 2024 shaping up to see the highest number of store closures since the pandemic.
So far this year, US retailers have shut 7,300 stores - up nearly 60 percent from 2023.
The final nail in the Party City coffin appears to have been self-inflicted
The chain's troubles began with an appraisal conducted by retail consultants Hilco Global
The New Jersey-based party supply giant is folding under financial pressure
Despite being saved from bankruptcy in 2023, the retailer never recovered
Party City, which was the largest party supply retailer in the U.S., employed around 6,400 full-time and 10,100 part-time workers as of 2021.
When Litwin took the helm in August he promised to strengthen Party City's finances.
A cloud of uncertainty has hung over Party City since the company first filed for Chapter 11 bankruptcy in January 2023. It only exited in September.
The company had wiped out $1 billion of its $1.7 billion debt. It also managed to keep the majority of its 800-plus stores open, though over 80 locations were shuttered between late 2022 and August 2024.
Party City - based in Woodcliff Lake, New Jersey - underwent a restructuring as lenders, including Monarch Alternative Capital and Silver Point Capital, took over and managed to clear around $1 billion of its debts, allowing about 850 shops to remain open.
Although some stores were saved, more than 60 had to close their doors, including five in Topeka, Kansas, Salina, New York, Joplin , Missouri and Owensboro, Kentucky, and most recently in Staten Island.
But the remaining $800 million debt proved too much.
Party City was successfully expanding before the pandemic and had sales of $2.35 billion in 2019, according to Forbes.
Overnight, its main customers - those hosting or attending parties - had no reason to shop at the store as social distancing was implemented.
As it emerged from the lockdowns it was plagued by supply chain issues, rampant inflation and increased competition.
