Party City and The Container Store add to a spike in retail bankruptcies in 2024
It was the week before Christmas when, all throughout retail, businesses were hustling to drive just one more sale. But those that had lost market share were putting the finishing touches on their Chapter 11s — with care.
Over the last few weeks, several high-profile bankruptcies put a damper on the end of the year for the retail industry. On December 21, Party City filed for Chapter 11 bankruptcy for the second time in less than two years. In a letter to employees obtained by CNN, the company said it would close all of its stores by February 28. Then, on December 23, The Container Store filed for bankruptcy, though CEO Satish Malhotra said in a statement that the company “is here to stay” and plans to emerge as a private company once it completes the Chapter 11 process.
Overall, Coresight Research tracked 51 major retail bankruptcies during the 2024 calendar year, up from the 25 bankruptcies it recorded in 2023. The companies that succumbed to bankruptcy in 2024 represent a wide range of sectors within retail, from Joann to Express to Big Lots.
Financial issues that were unique to each company caused many of these retail bankruptcies, such as high debt loads or expensive store leases. But macroeconomic factors didn’t help either. There were a number of home goods businesses that filed for bankruptcy in 2024, ranging from American Freight to LL Flooring, that were hurt by continued weaknesses in the housing market. Inflation also led to many shoppers pulling back on discretionary purchases, opting to spend more of their money at value-driven, one-stop-shop retailers like Walmart or Costco. Pressure from new entrants like Temu and Shein didn’t help either.
Put together, these issues had been slowly chipping away at many retailers’ businesses for years, but they finally came to a head in 2024.
“Total retail sales growth was robust in 2024 but performance was uneven and some sectors faced considerably weaker demand than others,” John Mercer, head of global research for Coresight Research, said in an email. Mercer cited big-ticket industries like appliances and electronics as ones that faced weaker demand “on top of generally heightened consumer caution.”
Overall, retail industry sales grew 3.4% in 2024, according to GlobalData. However, performance across the retail industry was very bifurcated. As just one example, sales at Walmart were up 5.3% during the third quarter, while sales at its chief rival, Target, increased just 1.1%. Similarly, Costco reported revenue growth of 5.35% during its third-quarter earnings.
Amazon was another big winner this year, projecting sales to be up somewhere between 7% and 11% by the end of 2024.
All of these businesses bring in hundreds of billions of dollars in revenue each year. So if Costco, Amazon and Walmart are seeing sales increase anywhere between 5% and 11% year-over-year, that’s almost certainly coming at the expense of other retailers, said Steve Dennis, founder of SageBerry Consulting and “Remarkable Retail” author. In particular, retailers offering middle-market goods fared especially poor. That is, retailers that aren’t known for low-cost goods but also aren’t known for offering luxury goods or high-end customer service.
These stuck-in-the-middle retailers accounted for many of the bankruptcy filings in 2024. Take a company like The Container Store, which sells shelves and storage containers that are similar to those found through other mass-market companies like Walmart and Amazon. In recent years, The Container Store invested more in its custom spaces business to differentiate itself. But that wasn’t enough to help the retailer ward off bankruptcy, as it had to resort to more discounts to clear inventory and appeal to a price-conscious consumer. General merchandise sales at The Container Store fell 18.7% in the second quarter of 2024.
Then, there was increased competition from off-price retailers, which have been steadily opening more stores for years to target price-conscious shoppers looking to stock up on apparel, home goods and beauty products. TJX Company, for example, opened about 150 stores in 2023.
The “cumulative effect” of all of this competition, Dennis said, has likely exacerbated bankruptcy filings.
Other issues, ranging from higher interest rates to increased labor costs to tariffs, also put pressure on retailers. Joann, for example, said in its bankruptcy filing that rising ocean freights increased its inventory costs by more than $150 million between 2021 and 2023.
This put pressure on all businesses, including the ones that should have benefitted from shoppers trading down. Mercer said that discount stores were actually the number one sector for store closures, according to Coresight’s research. In its bankruptcy filing posted in April, 99 Cents Only Stores said that the “unprecedented impact of the Covid-19 pandemic, shifting consumer demand, rising levels of shrink, persistent inflationary pressures and other macroeconomic headwinds greatly impacted the company’s ability to operate.”
Coresight also believes that there is “under-recognized pressure on some retailers from low-price cross-border retailers and marketplaces.” This includes Temu and Shein, as well as TikTok Shop and AliExpress. While there is no data on exactly how much market share these companies may have taken from other retailers in 2024, Coresight estimates that Temu and Shien will have generated more than $100 billion in combined GMV in 2024.
“We expect other general merchandise retailers, including in categories from automotive to home to pet, to be threatened by the further growth of Temu and the scaling of Shein’s non-clothing offering,” Mercer wrote.
Overall, “the middle ground is a very tough place to really stake out a claim [in retail],” Dennis said. Brands can either get out of the middle if they “go more strongly to the value side, or you go more strongly to kind of the upscale, experiential specialty side,” he said.
But that’s not enough to spare a business if it doesn’t make the right bets in other areas. Big Lots, which appeals to bargain shoppers and filed for bankruptcy in September, struggled as it opened too many stores and started focusing more on furniture – and was still undercut by other companies like Walmart and Amazon on price. Its sales performance in recent years laid bare how deep rooted the problems were at Big Lots. Sales declined by 14% in 2023, and 11% in 2022.
As Dennis put it, It’s rarely macroeconomic factors that bring on bankruptcy filings but rather “a weak business model, horrible execution or too much leverage.”