Retailer Party City has filed for Chapter 11 bankruptcy protection in a bid to restructure its heavy debt load and keep its doors open after supply chain woes, rising inflation and a consumer slowdown took a chunk out of sales.

The longtime retailer, best known for its Halloween costumes and party decorations, has been saddled by historic inflation and a shrinking market cap. It decided to move forward with bankruptcy in November after financial advisors determined it was the best way to save the business, the retailer wrote in a Wednesday court filing.

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Party City’s business had been growing and reached approximately $2.35 billion in revenue by 2019. But for years, it’s faced rising competition from e-commerce brands and big-box retailers. And instead of growing its digital business, the company burned cash keeping some 800 stores across the country open.

“They’re competing against Walmart, and Target and Amazon and the dollar stores and grocery stores,” said Joe Feldman, an analyst at Telsey Advisory Group who had covered Party City since its IPO in 2015. He dropped coverage of Party City on Dec. 30 as bankruptcy loomed.

During the Covid pandemic, sales ground to a halt when stores across the country were forced to shutter and consumers stopped celebrating the typical events they relied on Party City to put on — birthday parties, graduations and Halloween.

When the world started to return to normalcy, Party City was hit once again by supply chain woes and a helium shortage, which put a major dent in one of its top-selling products: balloons.

“They weren’t upgrading as quickly. The business was slower. You lay on a few external events and again, here we are. It’s just been an erosion over the past couple of years,” said Feldman.

The bankruptcy petition, filed late Tuesday, comes as consumers slow down their spending and the retailer’s debt continues to weigh on the business. As of Sept. 30, the company said it had $1.67 billion in debt, with available liquidity of $122 million.

While bankruptcy will put a host of new pressures on the retailer, the party isn’t over just yet. Comparable store sales for Party City’s most recently reported quarter, ended Sept. 30, dropped by 3.2% year over year but were up 11.2% versus 2019.

The company is using bankruptcy as an opportunity to restructure its debt and keep a smaller number of stores open.

“As we take this important step to put our business on stronger financial footing for the future, we are as committed as ever to inspiring joy by making it easy for our customers to create unforgettable memories,” Party City’s CEO, Brad Weston, said in a Tuesday news release.

“We appreciate the commitment of our team members and the continued support of our partners as we further enhance our position as the ‘go to’ one-stop-shop for celebrating life’s special moments.”

Party City said Wednesday it struck an agreement to reduce its debt and has already received support from a group holding more than 70% of its first lien debt to move forward with its bankruptcy plan, according to court papers and a filing with the U.S. Securities and Exchange Commission.

Party City has secured a $150 million bankruptcy loan and will seek approval on Wednesday from the U.S. Bankruptcy Court in the Southern District of Texas to use half of those funds to immediately pay wages and vendors, among other expenses.

In court papers, David Orlofsky of consulting firm AlixPartners, the company’s chief restructuring officer, noted, “continued and historic inflationary pressures and a declining stock price” led the company and its team of advisors to move forward with restructuring under bankruptcy. The move will allow Party City to fix its balance sheet and avoid liquidation.

As the company emerged from a pandemic sales slump, it had a new problem to contend with: a liquidity squeeze and a slowdown in consumer spending. It tapped retail consulting firm AlixPartners to explore its options, particularly securing new financing to operate the business, but when they couldn’t find new creditors by late 2022, they pivoted toward preparing a bankruptcy filing and securing support from lenders.

During the retailer’s last earnings call in November, Weston said a more challenging economic environment was keeping shoppers from spending as freely on celebrations. As a result, he told investors the company was aiming to reduce costs by $30 million, which included reducing its corporate workforce by 19%.

As of Wednesday, the company has 16,330 full-time and part-time employees and 240 temporary workers, Party City noted in court filings.

Jonathan Reid, a credit analyst at Fitch Ratings, said Party City filed for bankruptcy as it saw two challenges ahead: rising interest rates and the threat of slower retail sales. Yet unlike other retailers that have filed for bankruptcy, he noted its business remains stable, and anticipates Party City will emerge from bankruptcy as a stronger company with a smaller store footprint.

Party City operates approximately 823 stores, of which it owns 770, according to court papers. As part of the bankruptcy, Party City is seeking approval to walk away from 28 store leases. It is also considering other store closures.

Shares of Party City jumped 10% premarket Wednesday and remained halted by midday. As of Tuesday’s close, the stock traded for just 37 cents and the company’s market value was about $42 million.