East Bay Business Times

Allen brings turnaround to party

By David Goll

Marty Allen is nothing if not realistic Marty Allen CEO Party America
about his role at revived Party America, a 36-store retail party goods chain that has emerged from bankruptcy to five years of fun and profits.

Although the company’s organizational chart pegs him as its president and CEO, his business cards simply read: “Marty Allen, chief listener.”

“I chose to put ‘chief listener’ on my cards partly because I’m just not big on (job) titles,” said Allen, who took over the top spot at the Alameda-based company in 1996, and today makes himself available to listen to 600 employees and an occasional customer – whether satisfied or irate.

“If I do my job well, listening to customers and employees is how I should be spending much of my time.”

That was no easy task during Allen’s first year or so on the job, after jumping to Party America from Williams-Sonoma Inc., where he ran one of its retail divisions. Allen had earned a reputation for corporate turnarounds after righting a small San Diego software company and then getting former Williams-Sonoma division California Closets in good enough shape to sell off.

He had his work cut out for him at Party America. The company had lost $3 million from a failed merger with Southern California chain Party World and had lost money for three consecutive years.

“I brought in a new management team when I got here, but we had a lot to overcome because of the bad merger,” Allen said. “One thing I noticed very quickly was a lack of control over inventory.”

The struggle to bring a lot of things under control at the limping, privately held company culminated with the filing of Chapter 11 bankruptcy on July 3, 1997. But it was a short-lived period. Allen and Party America emerged as a restructured company in less than six months.

“It was an intense period,” said the Philadelphia native, who now resides in the Oakland hills. “I tell everyone that during those six months, I got an MBA in bankruptcy administration.”

After entering bankruptcy during the Fourth of July holiday, Allen and his management team spent most of their 1997 Christmas holidays in federal bankruptcy court in Los Angeles, extricating Party America from Chapter 11. When they emerged Dec. 23, the Gordon Bros. Group LLC of Boston, Allen and several members of the company’s management team were the new owners. Their next goal was straightforward, but daunting.

“We wanted to build the best party store in America,” he said, although this had to be accomplished at the same time he was cutting expenses by 25 percent.

To that end, over the past 5 1/2 years Allen has presided over the closing of 21 poorly performing stores and the renegotiation of leases for the remaining locations; a major upgrade of in-store and corporate technology; an overhaul of its inventory system, so each of his 36 stores in California, Utah and Colorado endeavor to carry 100 percent of all items at all times; and an emphasis on employee training to improve customer service.

“I am a fanatic about customer service,” he said. “We may not be able to do things 100 percent better than our competition, but we can do 100 things 1 percent better than other stores.”

That, according to Allen, means maintaining clean, attractive and well-stocked stores, offering spotless and easily accessible bathrooms filled with humorous posters to tickle customers’ funny bones, and treating customers well. But, he added, he wants to treat his workers well, too. After all, it should be fun to work for a party store.

“When it comes down to it, companies are the people who work there,” Allen said. “I’m very proud we have a very low turnover rate.”

Something must indeed be working for Allen. During each of the past five fiscal years, Party America has seen double-digit increases in sales and a steady growth in profits, including 11.2 percent in fiscal 2002 as compared with 2001. “At this point, we are a company with no debt,” he said. “I guess you could call us self-funded, since we also don’t have a nickel of investment.”

Self-reliant Party America will come close to $50 million in sales this year. Individual stores today carry up to 20,000 items of merchandise, about 20 percent of which are purely seasonal, catering to every kind of socializing between New Year’s Day and New Year’s Eve. Because virtually all of his store’s customers are mothers between the ages of 25 and 45, Allen said the company has a very distinct mission.

“We tell our customers we can take them from their baby showers to their child’s 21st birthday party,” he said.

Between 1998 and 2002, Allen opened 11 stores, including the most recent in the upscale retail development called The Grove that was built next to the venerable Farmers Market in Los Angeles. The center, which opened last year, is anchored by such stores as Nordstrom, Crate & Barrel, J. Crew and Abercrombie & Fitch.

“The Grove is quite a step up for our company,” said Allen, noting that most of his stores are in big-box retail power centers, such as Union Landing in Union City. “It’s a high-risk strategy, but one I think we need to take. It moves us in an upscale direction. We’ll see if we can swim in these waters.”

Allen said he felt more comfortable about opening a store there after hearing that Cost Plus Inc., the fast-growing Oakland-based food and housewares company that operates Cost Plus World Market stores, had also decided to locate there. “I did this for branding purposes,” he said. “About 20 million people a year visit (The Grove), so the exposure is tremendous. A lot of people who might otherwise not have heard about us will get to know our stores.”

Allen will need all the advantages he can leverage, given the highly competitive nature of this segment of the retailing business, and retail generally, according to one industry observer. Kevin Wilder, partner affiliate with the Chicago-based retail strategy firm McMillan-Doolittle, said companies such as Party America have rivals everywhere, including in some unexpected places. “Not only do they face competition from larger big-box party stores like Party City, but stores like Walgreens, which have at least a couple of aisles in each store devoted to seasonal merchandise,” Wilder said. “Then you have gift stores, from nationwide chains to mom-and-pop operations. And virtually everyone has to go up against the huge general merchandise chains, especially Target and Wal-Mart.”

Wilder said Allen’s preoccupation with providing good customer service will be one of his most valuable tools in distinguishing his company from his legion of rivals, one of the biggest of which is Party City Corp., a Rockaway, N.J.-based chain that operates 480 stores nationwide and had sales of $423.5 million in 2002.

Something that would also help Allen would be to attract another round of investment, an effort that is just getting under way. “It will help us to grow faster,” Allen said, adding that he’d like to increase his store base by 10 to 15 new locations annually, instead of the current rate of three to five. “But we will stay in the western states, in places like Arizona, Nevada, Oregon and Washington. I don’t see us going east of the Rockies. I think it’s a realistic goal of having 80 to 100 stores someday.”