A familiar story. A private equity firm buys up a business via leveraged buyout and said business is bankrupt soon after. To be fair to this case though, I doubt they would've survived regardless....
A familiar story. A private equity firm buys up a business via leveraged buyout and said business is bankrupt soon after.
To be fair to this case though, I doubt they would've survived regardless. A business that depends on stocking a large variety of products has a ton of overhead in floorspace alone while still losing out on selection to the Internet. It makes sense that as people are reigning in spending businesses like this that depend on discretionary funds will fall. It's even possible it was already beyond saving when private equity showed up to pick the last scraps from the dying husk, although I'd guess they at least accelerated it's demise.
The bit that counters everything I just said though is that it's a separate entity in Canada and there it is doing just fine. So maybe the business could have been fine if managed better.
I went to one a couple of years ago in the US and felt like the entire store was a throwback to the 90s in a "how does this still exist?" kind of way. The whole business is predicated on cheap...
I went to one a couple of years ago in the US and felt like the entire store was a throwback to the 90s in a "how does this still exist?" kind of way.
The whole business is predicated on cheap branded garbage. The concept of "buy it for life" birthday party ornaments just doesn't make sense so it has to be garbage. The internet has some much more efficient ways to drop ship garbage than a brick and mortar store ever will.
I honestly can’t recall a time where I went to a party that was full of the kind of stuff that party city sells. Paper and plastic serving and eating ware, yes, but not oddly specific colored ones...
I honestly can’t recall a time where I went to a party that was full of the kind of stuff that party city sells. Paper and plastic serving and eating ware, yes, but not oddly specific colored ones or IP-branded stuff. Granted I don’t go to kids parties.
To me, going to Party City was less of a trip to the 90s and more of a trip to the 99¢ Only store before they closed down; a bunch of extremely cheap generic goods generally strewn about and packed way too densely.
As far as I understand, private equity theoretically has no incentive to bankrupt a company they purchased, even with a leveraged buyout. They would much rather own a profit-generating business...
As far as I understand, private equity theoretically has no incentive to bankrupt a company they purchased, even with a leveraged buyout. They would much rather own a profit-generating business than the temporary gains from the bankruptcy.
The biggest issue I see with a leveraged buyout is that a private equity firm also has no incentive to stop the company going bankrupt. If their company declares bankruptcy, the assets of that company just disappear. The equity firm loses nothing except the debt+asset bundle (which, upon bankruptcy, is a liability). All the risk has been shifted onto the lender.
This means there is a strong incentive for shareholders of a dying company to sell to private equity. The shareholders want to see maximum gains, and they can sell to private equity knowing that private equity will pay the full price even if they know bankruptcy is inevitable. That’s why this story is so common.
So who is lending? This private equity deal went through pre-COVID, so maybe the organizing banks were just naive about the future of brick-and-mortar.
However, the frequency of leveraged bankruptcies makes me think there’s some clever accounting going on from the lending side. I suspect there’s a tax loophole where the actual risk is being shifted onto the government from the lending banks.
Honestly party stores don't seem that viable of a business model to me in the long term. Even without the internet, you can find basic party supplies at stores like Target or Walmart. Most people...
Honestly party stores don't seem that viable of a business model to me in the long term. Even without the internet, you can find basic party supplies at stores like Target or Walmart. Most people don't go all-out for parties with decorations unless it's a kid's themed birthday. At most I think most people would shop at one twice a year? I mainly remember visiting one as a kid for Halloween costume stuff and balloons.
I feel like the pandemic was probably a big nail in an already partially-built coffin.
I wonder if we will get a trifecta here, with Joann (fabric store) also going bankrupt recently. The trifecta would be the US and Canadian craftsore Michael's going down next. The irony is that...
I wonder if we will get a trifecta here, with Joann (fabric store) also going bankrupt recently. The trifecta would be the US and Canadian craftsore Michael's going down next.
The irony is that Michael's has decided to try and absorb the market left empty by Joann and Party City closing. The local stores by me have signs literally saying, "to our Joann and Party City shoppers, here are where the fabric and balloons are" and then lists the aisles.
One commonality with these stores is that they continuously add products and services, even when they cannot sustain their current workload (skeleton crew for labor hours). Why don't these stores just scale down instead of continuing to add more shit, including opening more stores?
You mention it in your comment that the Canadian entities of Party City survived. It seems like they made the decision to actually cater to their base audience instead of trying to shove things down their throats or add things the consumer didn't want or expand their audience base (all speculation).
One way that Michael's has tried to stay relevant is by basically becoming a fulfillment center- buy online and pick up in store, ship from store, and it is even a UPS drop off point; So they are attempting to utilize some of their existing infrastructure to maintain their profits, at least. But this comes at a cost of sacrificing attention to your main consumer base, which is supposedly craftspeople and makers.
When I speak to people at Michael's and Joann you hear a lot of the same things, they kept adding services or items that the employees could not fulfill and thus the consumer base stopped coming. Right now at Michael's at any given time you will see three employees - a manager, a cashier, and a floor associate. This is for a store that has a huge footprint, for anyone that has not been there (18,000 sq feet or about 1600 sq meters). They added balloons and only people over 18 can operate the helium tanks, so you will be standing in line waiting for the cashier(some items require the cashier, can't be bought at self check-out) watching some poor associate filling 20 latex balloons and tying them by hand, which takes like 30-45 minutes. People just leave or steal, tbh.
Random notes about balloons and Joann
I'm curious what happened with the balloon company, Anagram. It went out of business and then was revived. Was Party City really it's main and only customer? I realize the helium was also probably at play. Why are balloons such a large market or used so regularly? Maybe I just don't know because I'm not a parent. What is Anagram going to do differently this time to not come to the same fate it did the first time?
Lastly, do these stores not have a crazy overhead for the amount of retail space they take up? I am always mind boggled that a store of that size that seemingly has no business for the majority of its hours can sustain itself. I suppose their seasonal sales make up for it, the mark-up on tinsel must be insane, and during peak season (Halloween-Christmas basically) the sales really do skyrocket...
I saw that sign when I went to Michael’s on a whim. It’s rather morbid. Coincidentally this was the first time I saw a Michael’s with bolts of fabric to sell by the yard. It was a tiny selection...
I saw that sign when I went to Michael’s on a whim. It’s rather morbid.
Coincidentally this was the first time I saw a Michael’s with bolts of fabric to sell by the yard. It was a tiny selection compared to even the smallest Joann’s, but it was there! There was a sign that said to go to the framing desk to get it cut but there was nobody there. Thankfully there was a tiny amount of fabric left on the bolt that I wanted so I just bought the whole thing.
Coincidentally the last time I tried to buy fabric I was at a Walmart, also on a whim. I pushed the button to call a worker to cut it for me, and then I left after waiting a full 20 minutes for them.
Combined with how many craft stores are overrun by decorations, I feel this is not a good era for crafters.
IMO, they also shouldn't be allowed to do leasebacks either. That is another common private equity trick for acquiring a company, saddling it with debt (additional ongoing costs of renting...
IMO, they also shouldn't be allowed to do leasebacks either. That is another common private equity trick for acquiring a company, saddling it with debt (additional ongoing costs of renting property they previously owned), but selling off its most valuable assets so even if it goes under they are still able to make a huge profit. With the added bonus that since the assets have been "sold" to the leaseback entity the equity firm either partnered with or even created/already own themselves, when they declare chapter 7 for the acquired company those assets won't be included in the liquidation.
Tangent, but this youtuber has many funny skits about working at party city, among other places. I really enjoy these "slice of life" style channels, even if the upshot for customer service is...
Tangent, but this youtuber has many funny skits about working at party city, among other places. I really enjoy these "slice of life" style channels, even if the upshot for customer service is that people are horrible to staff. At least she laughs about most of it.
😊 I have multiple monitors, so I just tag the topic as I'm watching the video, and if a subject comes up in it then I simply add a tag related to it. I do also kinda cheat a little bit too though,...
😊 I have multiple monitors, so I just tag the topic as I'm watching the video, and if a subject comes up in it then I simply add a tag related to it. I do also kinda cheat a little bit too though, by simply copying tags from previous similar submissions. ;)
BTW, please don't take my excessive tagging as if it should be the norm. I am going way way overboard just for the fun of it. :P
A familiar story. A private equity firm buys up a business via leveraged buyout and said business is bankrupt soon after.
To be fair to this case though, I doubt they would've survived regardless. A business that depends on stocking a large variety of products has a ton of overhead in floorspace alone while still losing out on selection to the Internet. It makes sense that as people are reigning in spending businesses like this that depend on discretionary funds will fall. It's even possible it was already beyond saving when private equity showed up to pick the last scraps from the dying husk, although I'd guess they at least accelerated it's demise.
The bit that counters everything I just said though is that it's a separate entity in Canada and there it is doing just fine. So maybe the business could have been fine if managed better.
I went to one a couple of years ago in the US and felt like the entire store was a throwback to the 90s in a "how does this still exist?" kind of way.
The whole business is predicated on cheap branded garbage. The concept of "buy it for life" birthday party ornaments just doesn't make sense so it has to be garbage. The internet has some much more efficient ways to drop ship garbage than a brick and mortar store ever will.
I honestly can’t recall a time where I went to a party that was full of the kind of stuff that party city sells. Paper and plastic serving and eating ware, yes, but not oddly specific colored ones or IP-branded stuff. Granted I don’t go to kids parties.
To me, going to Party City was less of a trip to the 90s and more of a trip to the 99¢ Only store before they closed down; a bunch of extremely cheap generic goods generally strewn about and packed way too densely.
It was for kids parties, but the number of kids is declining each year, so at best it was going to slowly decline.
As far as I understand, private equity theoretically has no incentive to bankrupt a company they purchased, even with a leveraged buyout. They would much rather own a profit-generating business than the temporary gains from the bankruptcy.
The biggest issue I see with a leveraged buyout is that a private equity firm also has no incentive to stop the company going bankrupt. If their company declares bankruptcy, the assets of that company just disappear. The equity firm loses nothing except the debt+asset bundle (which, upon bankruptcy, is a liability). All the risk has been shifted onto the lender.
This means there is a strong incentive for shareholders of a dying company to sell to private equity. The shareholders want to see maximum gains, and they can sell to private equity knowing that private equity will pay the full price even if they know bankruptcy is inevitable. That’s why this story is so common.
So who is lending? This private equity deal went through pre-COVID, so maybe the organizing banks were just naive about the future of brick-and-mortar.
However, the frequency of leveraged bankruptcies makes me think there’s some clever accounting going on from the lending side. I suspect there’s a tax loophole where the actual risk is being shifted onto the government from the lending banks.
Honestly party stores don't seem that viable of a business model to me in the long term. Even without the internet, you can find basic party supplies at stores like Target or Walmart. Most people don't go all-out for parties with decorations unless it's a kid's themed birthday. At most I think most people would shop at one twice a year? I mainly remember visiting one as a kid for Halloween costume stuff and balloons.
I feel like the pandemic was probably a big nail in an already partially-built coffin.
I wonder if we will get a trifecta here, with Joann (fabric store) also going bankrupt recently. The trifecta would be the US and Canadian craftsore Michael's going down next.
The irony is that Michael's has decided to try and absorb the market left empty by Joann and Party City closing. The local stores by me have signs literally saying, "to our Joann and Party City shoppers, here are where the fabric and balloons are" and then lists the aisles.
One commonality with these stores is that they continuously add products and services, even when they cannot sustain their current workload (skeleton crew for labor hours). Why don't these stores just scale down instead of continuing to add more shit, including opening more stores?
You mention it in your comment that the Canadian entities of Party City survived. It seems like they made the decision to actually cater to their base audience instead of trying to shove things down their throats or add things the consumer didn't want or expand their audience base (all speculation).
One way that Michael's has tried to stay relevant is by basically becoming a fulfillment center- buy online and pick up in store, ship from store, and it is even a UPS drop off point; So they are attempting to utilize some of their existing infrastructure to maintain their profits, at least. But this comes at a cost of sacrificing attention to your main consumer base, which is supposedly craftspeople and makers.
When I speak to people at Michael's and Joann you hear a lot of the same things, they kept adding services or items that the employees could not fulfill and thus the consumer base stopped coming. Right now at Michael's at any given time you will see three employees - a manager, a cashier, and a floor associate. This is for a store that has a huge footprint, for anyone that has not been there (18,000 sq feet or about 1600 sq meters). They added balloons and only people over 18 can operate the helium tanks, so you will be standing in line waiting for the cashier(some items require the cashier, can't be bought at self check-out) watching some poor associate filling 20 latex balloons and tying them by hand, which takes like 30-45 minutes. People just leave or steal, tbh.
Random notes about balloons and Joann
I'm curious what happened with the balloon company, Anagram. It went out of business and then was revived. Was Party City really it's main and only customer? I realize the helium was also probably at play. Why are balloons such a large market or used so regularly? Maybe I just don't know because I'm not a parent. What is Anagram going to do differently this time to not come to the same fate it did the first time?
There is a video about Joann's bankruptcy as well haven't watched it yet.
Lastly, do these stores not have a crazy overhead for the amount of retail space they take up? I am always mind boggled that a store of that size that seemingly has no business for the majority of its hours can sustain itself. I suppose their seasonal sales make up for it, the mark-up on tinsel must be insane, and during peak season (Halloween-Christmas basically) the sales really do skyrocket...
I saw that sign when I went to Michael’s on a whim. It’s rather morbid.
Coincidentally this was the first time I saw a Michael’s with bolts of fabric to sell by the yard. It was a tiny selection compared to even the smallest Joann’s, but it was there! There was a sign that said to go to the framing desk to get it cut but there was nobody there. Thankfully there was a tiny amount of fabric left on the bolt that I wanted so I just bought the whole thing.
Coincidentally the last time I tried to buy fabric I was at a Walmart, also on a whim. I pushed the button to call a worker to cut it for me, and then I left after waiting a full 20 minutes for them.
Combined with how many craft stores are overrun by decorations, I feel this is not a good era for crafters.
Jake's done loads of those. I suppose Toys R Us is a classic example. Maplin Electronics here in the UK. Bought with, and sunk by, debt.
I feel like companies shouldn't be allowed to aquire other companies with debt, only cash reserves.
Then we tax the gathering of cash reserves.
IMO, they also shouldn't be allowed to do leasebacks either. That is another common private equity trick for acquiring a company, saddling it with debt (additional ongoing costs of renting property they previously owned), but selling off its most valuable assets so even if it goes under they are still able to make a huge profit. With the added bonus that since the assets have been "sold" to the leaseback entity the equity firm either partnered with or even created/already own themselves, when they declare chapter 7 for the acquired company those assets won't be included in the liquidation.
Nebula link: https://nebula.tv/videos/bright-sun-films-bankrupt-party-city/
Tangent, but this youtuber has many funny skits about working at party city, among other places. I really enjoy these "slice of life" style channels, even if the upshot for customer service is that people are horrible to staff. At least she laughs about most of it.
This is just noise, but @cfabbro: you are wild with these tags. You're so good. I struggle to come up with one or two when I post lol
😊 I have multiple monitors, so I just tag the topic as I'm watching the video, and if a subject comes up in it then I simply add a tag related to it. I do also kinda cheat a little bit too though, by simply copying tags from previous similar submissions. ;)
BTW, please don't take my excessive tagging as if it should be the norm. I am going way way overboard just for the fun of it. :P