Rising Inflation Reshapes Consumer Spending Habits

In partnership with

Find Best Apps for eCommerce || Newsletter

This week’s edition brings two stories worth following. Party City, after its second bankruptcy in two years, is set to start a new chapter under new ownership. Learn more about their auction and what lies ahead for the iconic brand.

Meanwhile, consumer sentiment has reached a new low amid rising inflation concerns. Discover how inflation expectations are influencing spending behavior across the U.S.

Let’s dive in.

Party City’s Road to Reinvention Under New Ownership

Party City Holdco is on the verge of a new chapter after a tumultuous journey through bankruptcy. The company has found a buyer in New Amscan, an affiliate of producer and distributor Ad Populum, which won a bankruptcy auction to acquire Party City’s intellectual property (IP) and wholesale operations for $20 million. This bid also includes Amscan’s operating assets.

Amscan is a major supplier of party essentials, including balloons, costumes, and other festive products. As the stalking horse bidder—a designation that gives an early bidder priority in the auction process—New Amscan had a clear advantage.

Court filings indicate that Michaels, the craft store chain, serves as the backup bidder for Party City’s IP. However, the auction is pending final approval from a bankruptcy court judge, expected on February 26.

Lease Auctions and Party City’s Store Closures

In late December, Party City announced it would be closing all its stores after filing for its second bankruptcy in two years. A&G Real Estate Partners stepped in to auction nearly 700 store leases across 45 states. The auctions began in early February and have already generated $14.5 million in gross proceeds, with additional leases still up for bids.

A wide range of retailers has shown interest in Party City’s leases. Dollar Tree bid on nearly 150 locations, while Five Below bid on around 40 leases. Other retailers, including Cavender’s, Rack Room Shoes, Books-A-Million, Barnes & Noble, Burlington, and La-Z-Boy, were also among the bidders. Even some of Party City’s landlords made bids to regain control of leased spaces.

What’s Next for Party City?

Ad Populum plans to breathe new life into Party City and Amscan. By leveraging their combined supply chains and distribution networks, the company aims to revitalize Party City’s long-standing brand in the party supply industry. Although Ad Populum declined to provide specific details, it is clear the new owners are determined to rebuild and evolve Party City’s business model.

The Struggles That Led to Bankruptcy

Party City’s financial woes were driven by increased competition from retailers like Spirit Halloween and the improved party merchandise offerings of major retailers, including Amazon and Target.

The company’s first bankruptcy filing, in January 2023, was part of a plan to eliminate nearly $1 billion in debt. A bondholder group extended a $150 million debtor-in-possession loan to keep operations afloat. Party City exited bankruptcy later that year, appointed a new CEO, and restructured its business.

However, the company’s recovery was short-lived. Mounting inflation, weakening consumer spending, and persistent debt forced Party City to file for bankruptcy again in December 2024. Despite its struggles, Party City’s brand recognition and market niche made it an appealing acquisition for New Amscan.

“10% of sales should coming from referrals”

Hey there! I’m Luke Yarnton, Founder of The Rave and a self-proclaimed referral marketing nerd 🤓. I’m obsessed with building referral programs that unlock real value.

• I’ve studied all the best cases (like Harry’s) and worked with 300+ Shopify Plus brands

• Helped companies build “referral armies” driving 10% of revenue (most programs only do 2%)

• Generated over $5M in referral transactions this year alone

Give me 15 minutes, and I’ll show you how to tap into your customers’ networks. Plus, I’ll buy you lunch ($20 UberEats voucher)!

👉 Book a no-pressure chat with me!

Consumer Sentiment Plummets Amid Rising Inflation

Consumer sentiment has hit a low not seen since July 2024, according to a recent Wells Fargo report. Short-term inflation expectations have surged for two consecutive months, with consumers now predicting a 4.3% inflation rate—up from 3.3% the previous month.

Just two months ago, consumers expected a 2.8% inflation rate over the next year. Long-term inflation expectations have also increased slightly to 3.3%, above the pre-pandemic average.

The Impact of Policy and Politics on Sentiment

The survey was conducted between January 21 and February 3, coinciding with former President Donald Trump’s announcement of new tariffs: 25% on Canadian and Mexican imports and 10% on Chinese goods. Although the U.S. paused tariffs for 30 days with Canada and Mexico, consumer sentiment remained cautious amid the possibility of future trade policy changes.

“It’s not just actual policy but the prospect of changes that can dictate economic behavior,” Wells Fargo economists explained in their analysis.

The report echoes findings from other surveys. The Conference Board noted a 4% drop in consumer confidence in January, marking the first decline in six months. Inflation and job market worries were the primary factors behind the decline.

How Inflation Is Changing Consumer Behavior

Rising inflation and economic uncertainty have already led many consumers to adjust their spending habits. A survey conducted by Talker Research in June 2024 found that 61% of respondents had changed their online shopping habits due to higher prices. Additionally, nearly 90% of those surveyed reported that their cost of living had risen over the past five years.

As inflationary pressures persist, businesses and consumers alike are preparing for more potential shifts in financial behavior. Companies will likely need to offer more promotions, flexible payment options, and innovative products to retain customers in this challenging environment.

For businesses, understanding these shifts in consumer sentiment will be crucial to navigating the months ahead.

Thanks for reading this week’s newsletter. We’d love to hear your thoughts on Party City’s transformation or how inflation is shaping your spending habits. Hit “reply” and share your perspective!