Popular retailer could fill void left by bankrupt competitor

The past few years have been brutal for the retail industry as a whole. But specialty retail has struggled immensely.

Consumers have been forced to change their spending priorities in the wake of surging inflation. When it's a struggle to put food on the table, it's harder to justify discretionary purchases.

Don't miss the move: Subscribe to TheStreet's free daily newsletter

Not shockingly, a number of niche retailers have filed for bankruptcy over the past year.

In December, Party City filed for Chapter 11 for the second time. Financial challenges and a decline in consumer spending did the once-popular chain in.

Related: Discount retailer closes suddenly for shocking reason

No sooner did Party City's bankruptcy filing go through than fellow specialty retailer Joann announced its second Chapter 11 in January. Joann faced challenges that ran the gamut from declining sales to inventory shortages.

A popular retailer could address a key consumer need

Not only did Party City and Joann both resort to bankruptcy, but both chains planned to close stores in conjunction with filing for Chapter 11.

Party City began shuttering 800 stores earlier this year. Many of those leases were put up for grabs following the announcement.

Related: Costco product change has members 'disgusted'

Meanwhile, in February, following its bankruptcy filing, Joann announced that it would be closing 500 of its 800 stores. Those closures span 50 states.

But there's good news for consumers who are already missing these specialty stores. One major retailer is expanding its inventory to offer many of the supplies Party City was famous for. And it could fulfill a key need for crafting enthusiasts, too.

Michaels comes to the rescue with party supply line

Michaels has long been a destination for all things craft-related. In that regard, it can, for many consumers, take the place of Joann.

But consumers who have been feeling the loss of Party City can now turn to Michaels for supplies such as balloons, banners, and other party decorations.

Related: Costco makes sneaky food pricing change, angers members

Michaels is actually going all-in on balloons specifically, rolling out more than 300 new designs in unique colors. It will also offer pre-made balloon bouquets for customers looking for something special.

The expectation is that by August, Michaels' selection of party supplies will be expanded by 200%, leading to the addition of more than 500 new items.

In-store events are also being expanded as part of this new initiative. Last year, Michaels hosted 5,000 parties, serving 42,000 kids across the U.S. and Canada.

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

This expansion on Michaels' part isn't surprising. Michaels was a bidder for Party City's intellectual property following the company's bankruptcy filing. It lost to Ad Populum, a conglomerate that owns a number of consumer brands.

But the move is also strategic, given Party City's demise.

Michaels was already poised to attract customers who can no longer shop at Joann. If it can capture a good chunk of Party City's audience, it could emerge as an even stronger specialty retail chain at a time when so many similar ones are struggling.

That said, Michaels may want to tread lightly, given the fate of its competitors.

Consumers are already spending very carefully because of inflation. And if tariff policies drive costs upward even more, it could fuel a more substantial pullback.

More Retail:

• Walmart, Target, Costco make major 2025 announcement
• Formerly bankrupt retailer makes painful decision to close more stores
• Top investor takes firm stance on troubled retail brand
• Walmart and Costco making major change affecting all customers

Still, the company is optimistic that expanding its inventory will improve its bottom line.

"With the expansion of our balloon offerings and party supplies, along with enhanced in-store events and personalized birthday party add-ons, we're making it easier than ever for families and friends to come together, celebrate, and express their creativity," said Shively.