Party America is Gordon Brothers
First Major Foray Beyond Liquidation Services
Boston – Gordon Brothers may never shake its reputation as the company failed retailers call when they need to clear out inventory and pay creditors, but sometimes the 100-year-old firm finds a retailer in need of resuscitation rather than liquidation. That was the situation in which Gordon Brothers found itself five years ago when it bought the bankrupt chain of 26 Party America stores.
“It wasn’t so much that we wanted to own a party goods retailers as it was the circumstances,” said Gordon Brothers Chairman, Michael Frieze of Party America, which was in bankruptcy at the time and being bid on in court by liquidators.
Michael Frieze, Chairman, Gordon Brothers Group
The party supply chain had hit bottom, and although there was a risk in acquiring the business, according to Frieze, “there was not a lot that could go wrong, but there was a lot that could go right.”
A lot also had to do with Party America CEO Marty Allen.
“Before we invest in a company we have to have an awful lot of confidence in the CEO of the company. We had the confidence we needed after meeting Marty,” Frieze said.
While in bankruptcy, Party America had closed 21 stores and emerged with 26 stores that were operational under renegotiated real estate contracts. Investments had also been made in technology so the retailer could replace manual systems with point-of-sale inventory and replenishment systems. Those systems are essential for any retailer, but especially for a party supply chain that emphasizes seasonal merchandise.
Today, Party America operates 36 stores with annual sales of nearly $50 million and is self-funding growth of three to five new stores annually.
“Considering we came out of Chapter 11 bankruptcy in 1998 following three consecutive years of losses, our record sales and profits for the past five years have been a tremendous success for us,” Allen said.
The company’s prototype store measures 10,000 square feet and stocks 20,000 everyday items, but also places a strong emphasis on seasonal goods as a means to differentiate itself from mass competitors against whom Allen said Party America fares very well.
Our No. 1 store sits less than 50 yards from a Wal-Mart,” Allen said.
Still, it is the seasonal aspect of the business and the inventory management aspects of the operations that is the most challenging and has been the undoing of the other party superstore retailers.
“I don’t think there is a retailer in the United States that has to deal with the seasonality of the party channel. That is what has made running these companies so difficult,” Allen said. “We have unusual spikes that most businesses don’t have.”
Party America targets 18 seasonal holidays, including the obvious major holidays of halloween and New Year’s Eve as well as Marti Gras, Passover and Labor Day.
However, when the holiday is over, the merchandise is practically worthless and only in rare cases, such as Halloween and Christmas are a limited number of items repacked for the following year. In other cases, Party America will actually give away seasonal merchandise if it has not sold at reduced prices after the holiday.
Despite the challenges, Allen is optimistic about the party goods retailing business and Gordon Brothers is pleased with it’s investment.
“I believe the party goods sector is strong and getting stronger,” Allen said.