Party's over for 28-store chain

For the nine months ended Sept 30, Partyco lost $3.3 million on sales of $19.3 million…a loss of $2 million on sales of $14.5 million, a year earlier. Despite the losses, Party City has opened 11 new stores in the 12 months ended September, 2001.

The Toronto Star
February 7, 2002

Party's over for 28-store chain
Sept. 11 fallout led to bankruptcy
Steven Theobald

Blame it on bin Laden.

Party City Ltd., a 28-store retail chain, has been forced into bankruptcy after a disastrous Halloween left the company unable to pay its bills.

"Party City's big month is October," explained Blair Davidson, senior vice-president at KPMG Inc.

"The 9/11 events made Halloween a much quieter event last year."

The Ontario Superior Court appointed KPMG receiver on Monday.

Party City was given bankruptcy protection three weeks ago under the Companies' Creditors Arrangement Act.

It owes its bank, Congress Financial Canada Ltd., $3.5 million while unsecured suppliers and landlords are owed approximately $7 million, Davidson said.

Bankruptcy protection was granted in the hopes Party City could be sold, but those efforts failed, prompting the courts to put the firm into full bankruptcy.

The company, with roughly 200 employees, has 18 locations in Ontario and 10 in Western Canada.

The stores average about 10,000 square feet and are located in big-box power centres and strip malls.

Party City will continue to operate while in bankruptcy, KPMG's Davidson said.

"We are very hopeful a going-concern buyer can be found for the chain," he said.

"We are going to try to do a deal by the end of February."

Not everyone in the party supply business is hurting.

Stephane Abbat, owner of It's My Party, on Toronto's Danforth Ave., said 2001 was his best year ever, with sales up about 5 per cent from 2000.

Abbat said he did feel an immediate impact from the Sept. 11 terrorist attacks. The next day corporate clients cancelled about $3,000 worth of orders.

"But by the end of October, the public had had enough of the dismal news," Abbat said.

"They were looking for a release."

The problem with Party City was not the concept, Abbat said.

The Canadian operations too closely followed the retail strategy of the U.S. parent, he said.

"In Canada, we don't party the same way," Abbat said.

"In the U.S., they are much more over-the-top," Abbat added.

Party City is owned by Concord-based Partyco Holdings Ltd., a publicly traded holding company.

In 1996, Partyco bought Canadian franchise rights from New Jersey-based Party City Corp., which operates more than 460 stores in the United States.

For the nine months ended Sept 30, Partyco lost $3.3 million on sales of $19.3 million. That compares with a loss of $2 million on sales of $14.5 million, a year earlier.

Despite the losses, Party City has opened 11 new stores in the 12 months ended September, 2001.


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