Should Michaels Join the Party?

Seeking to take advantage of Party City’s store closures, Michaels announced plans to expand offerings of balloons, party supplies, and in-store events to reach consumers looking to party.

Party City in December filed for bankruptcy for the second time in two years, with plans to close all of its 692 stores. It still operates 29 stores, according to its website.

Michaels, best known for selling arts and crafts supplies, said that since the start of January, searches on Michaels.com are up 150% for balloons and 155% for party supplies.

In response, Michaels has started introducing over 300 new balloon options and offering pre-made, grab-and-go balloon bouquets, including graduation arrangements. By August, its overall selection of party supplies will be expanded by 200%, resulting in the addition of over 500 items across paper party supplies, accessories, and décor.

In-store events are also being expanded following the introduction of in-store birthday parties last year, with new spring and summer seasonal birthday themes. Last year, Michaels hosted 5,000 parties, serving 42,000 kids across the U.S. and Canada.

Michaels, with 1,300 stores, is also bringing back monthly “MakeBreaks” where shoppers create a project from start to finish for a $10 fee. In-store classes had been paused since the pandemic. Stores will further host more private gatherings, where attendees can tackle group crafting projects such as paint pouring, self-care crafting, knitting, and plushie making.

The increased emphasis on in-store events comes as Michaels’ first-ever Creativity Trend Report found that seven out of 10 Gen Z and Millennial customers prefer group crafting nights over dinner and drinks.

“Michaels is committed to helping our customers create unforgettable celebrations for life’s most precious moments and milestones,” said Chief Merchandising Officer Stacey Shively.

Michaels had been close to acquiring Party City’s intellectual property, coming in second to a $20 million bid from Ad Populum, a consumer product conglomerate that owns a number of brands previously sold at the party retailer, including collectibles brand NECA, Chia Pet, and costume makers Rubies and Smiffys.

Beyond party items, Michaels has an opportunity to capture share closer to the crafts areas as fabric retailer JOANN filed for bankruptcy in February and is closing all of its 800 locations. A survey conducted by Numerator in February revealed that 74% of JOANN’s customers intend to shift their purchases to Michaels or Hobby Lobby.

Michaels will continue to face similar challenges in those categories that led to the bankruptcies of JOANN and Party City.

JOANN said in court documents that beyond the “sluggish economy,” its bankruptcy was due to inventory shortages due to suppliers’ elimination of certain products the chain relied on and “unpredictable delivery schedules.”

Party City’s challenges have been attributed to heightened competition from Walmart, Target, Spirit Halloween, and online sellers such as Amazon. In court documents, Party City blamed its bankruptcy on “challenges affecting all major retailers, including, among other things, inflationary pressures, macroeconomic factors affecting consumer discretionary spending, contracting margins, and shifting customer preferences.”