Party City's future is up in the air: Company announces it's closing 45 stores after helium shortage causes balloon sales to plummet

  • Party City announced this week that it will close 45 nationwide locations
  • They say the global helium shortage means they are not able to get enough of the gas to inflate balloons in store - and so they are losing customers and sales
  • The party store giant says a new contract will help secure additional quantities of helium for the next 2.5 years
  • Around 75 per cent of the world's helium only comes from three sources
  • The company ended the first quarter in 2019 with $1,991 million in debt

Party City announced on Thursday that they will be closing down 45 nationwide locations because the global helium shortage means they are not able to get enough of the gas to inflate balloons in store. 

'Overall, our first quarter results were largely in line with our expectations on the top and bottom lines, inclusive of the helium shortage, which negatively impacted our latex and metallic balloon categories,' said James M. Harrison, Party City's Chief Executive Officer.      

In an attempt to address the problem, Party City says they have signed a contract with a new source to help secure additional quantities of helium for the next 2.5 years. 

Party City plans to close 45 nationwide locations following a shortage of helium that drove down sales. A file photo of a closed Party City location is shown

Party City plans to close 45 nationwide locations following a shortage of helium that drove down sales. A file photo of a closed Party City location is shown

'We believe this new source should substantially eliminate the shortfall we are experiencing at current allocation rates and improve our ability to return to a normal level of latex and metallic balloon sales,' Harrison said. 

DWINDLING RESERVES 

Helium, the second lightest element in the universe, is created by the slow radioactive decay of rock below the Earth's surface.

More than half the world's supply is stored in the US National Helium Reserve in Texas.

But that supply is dwindling after the US passed a law in 1996 obliging it to sell off a certain volume of helium every year at a fixed price, in order to raise funds for the Government.

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A helium shortage has been years in the making as 75 per cent of the world's helium only comes from only three sources: ExxonMobil in Wyoming, Ras Laffan Industrial City in Qatar and the National Helium Reserve in Texas, according to USA Today

But reserves in Texas are being depleted at an alarming rate as overall demand for the gas grows. 

Commercial supplies will be stopped from there in 2021, after the authority controlling it fell into debt. 

A new reserve was found in Tanzania was discovered in 2017. Helium One began drilling at the Tanzania reserve in 2018.

Even though commonly used for balloons, helium is also used to inflate blimps and  pressurize the fuels tanks used in rockets. 

Average day items would also be impossible to make without helium. The gas is used to make computer chips, airbags and the cables that carry high speed internet and cable services into homes.  

The party store giant is having a hard time keeping up with a high demand

The party store giant is having a hard time keeping up with the high demand for balloons. A Party City employee is shown handling a balloon order

The gas is also crucial for scientists because it’s used to cools atoms to -270C to stop them vibrating, which makes investigating their nature far more straightforward.

It’s also widely used in medical scanners and exotic machines such as the Large Hadron Collider.

WHAT CAN HELIUM BE USED FOR? 

Cooling medium for the Large Hadron Collider (LHC), MRI scanners and satellite instruments

- Because of its low density, helium is used to fill balloons, weather balloons and airships

- Because it is very unreactive, it is used to provide an inert protective atmosphere for making fibre optics and semiconductors

- Helium is also used to detect leaks, such as in air-conditioning systems, and because it diffuses quickly it is used to inflate car airbags after impact

- A mixture of 80 per cent helium and 20 per cent oxygen is used as an artificial atmosphere for deep-sea divers and others working under pressurised conditions

- Helium-neon gas lasers are also used to scan barcodes in supermarket checkouts

Source: Royal Society of Chemistry 

 

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Now, its scarcity is causing alarm bells in the scientific community.

Although helium is the second-most abundant element in the universe, Earth only has a limited supply - and the U.S National Research Council warned in 2012 that the gas could run out by 2040.

The U.S. Department of Interior estimated in 2014 that the Earth only has 1,169 billion cubic feet of helium reserves left. 

In fact, it’s now becoming so rare that Nobel prize-winning physicist Professor Robert Richardson of New York’s Cornell University believes that helium-filled party balloons should be on sale for $100.

Previously the U.S had built up a huge stockpile of helium.

But in the 1990s, however, it began selling it off, creating a surplus of supply and driving prices down, which was good news for party-balloon makers, but not for scientists.

Now even party stores are suffering as dwindling supplies have pushed up priced by 250 per cent over the last decade. 

Every year Party City closes down 10 to 15 stores in response to ongoing market and economic changes but the company remains optimistic that this year's increasingly high number of closings will not become the new normal. 

The company says they will focus on the the most successful locations to help improve the company's portfolio. 

Party City ended the quarter with $1,991 million in debt.