Party City Will Close 45 Stores after Missing Q1 Sales

Party City party supply store chain suffers from falling sales quite regularly and, in fact, even though first-quarter earnings have been as expected, the chain is likely to close several dozen stores this year.  Some argue that this is due to a shortage of helium that negatively affected balloon sales.

Sure enough, with reporting these numbers, the company estimates it will close approximately 45 of its 870 stores by the end of 2019.  

Of course, store closures are nothing new to the national franchise, but this number might be larger than usual.  Party City Hold Co CEO James M. Harrison explains, “Each year, Party City typically closes 10-15 stores as a part of our prudent network optimization process and in response to ongoing consumer, market and economic changes that naturally arise in the business.”

In terms of the larger numbers, Harrison notes, “This year, after careful consideration and evaluation of our store fleet, we’ve made the decision to close more stores than usual in order to help optimize our market-level performance, focus on the most profitable locations and improve the overall health of our store portfolio.”

This comes on the heels of Party City reporting a net loss of $26.6 million in the first quarter of the year.  That equates to about $0.32 cents a share.  One year ago, earnings were $4.1 million: the equivalent of a $0.01 cents loss per share.  Not accounting for costs related to the company’s “store-optimization program” (and other items), the adjusted EPS was $0.01 cents, which was the original expert estimate. 

Furthermore, total revenue for the quarter improved 1 percent, to $513.1 million, from $507.8 million. This was still a little short of estimates of $522.6 million.  Also, retail sales increased 4.0 percent, mostly driven by square footage growth from these store acquisitions, with same-store sales falling 1.4 percent. 

In response to the helium shortage, Harrison is sure to note that it was a factor in sluggish sales of its most popular items:  latex and metallic balloons.  But he also says they have signed a new helium source agreement that will help restore that aspect of their business. 

He concludes, “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.”

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