Specialty retailer strikes upbeat note

Party City topped earnings estimates for its second quarter and said it is on track to deliver its full year total revenue and earnings guidance.



The party supplies retailer and wholesaler reported net income of $25.0 million in the quarter, compared to $22.5 million in the year-ago period. Earnings, adjusted for non-recurring costs, came to 28 cents per share, topping Wall Street expectations



Party City posted revenue of $544.9 million in the quarter, missing Street forecasts. Retail sales rose 6.3%, driven primarily by increased store count through acquired franchise stores (36), one acquired independent store and new store growth (22 net new Party City stores added in the past 12 months). Same-store sales inched up 0.1%.



“We delivered strong second quarter revenue growth of just under 5% on a reported basis, or almost 6% in constant currency, and are pleased with how the quarter played out, as we met our topline and bottom line objectives," said James Harrison, CEO, Party City. "While retail comps were slightly softer than we had forecasted, which we have reflected in our updated full year comp outlook, we were very pleased with our revenue growth and our overall profitability."



During the quarter, Party City acquired a minority interest in Punchbowl, a leader in digital invitations and greeting cards. It also invested approximately $6 million into the development of Kazzam, its online exchange platform for party-related services.

Neil Saunders, managing director of GlobalData Retail, noted that while Party City faces serious competitive challenges from "generalist players" like Walmart and Target, the specialty retailer is doing the right things to stimulate growth.



"We are encouraged that Party City is working hard to connect with consumers, especially in the digital space," Saunders said. "Kazzam, the online party planning service it (Party City) is developing, provides an excellent showcase for its products. The recent investment in Punchbowl - the online greetings and invitation platform - provides another opportunity to create customer connections and potential sales."



Party City Holdco designs, manufactures, sources and distributes party goods. The company’s retail operations include over 900 specialty retail party supply stores (including approximately 150 franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.