Party City's Q3 loss widens, sales; slashes outlook on weak Halloween sales

Party City Holdco Inc. is not in party mood as the retailer cut its full-year outlook amid weak third-quarter and October sales. 

The party goods retailer’s net loss widened to $39.7 million, or $3.02 a share, in the quarter ended Sept. 30, from a loss of $2.0 million, or 3 cents a share, in the year-ago period. The adjusted loss was 28 cents, compared Street estimates of breakeven. 

Total revenues fell 2.3% to $540.2 million, below analysts’ estimates of $551.0 million. Total retail sales decreased 1.7%, principally due to ongoing shortages in the helium gas used to fill balloons.

Party City also reported a disappointing Halloween, as related product sales for the quarter and the month of October combined fell 3.2%. (During the Halloween season, Party City operated 256 temporary Halloween City stores, compared to 239 in 2018.) 

“Our third quarter and October results were disappointing as many of the tailwinds that we expected failed to materialize,” stated James M. Harrison, CEO. “We are carefully analyzing our Halloween results and addressing the underlying issues and opportunities we have identified to improve the business going forward. We have revised our full-year outlook to reflect the third quarter and October shortfalls.” 

Party City said it now expects 2019 revenue to fall the range of $2.35 billion to $2.38 billion, down from its previous forecast of $2.40 billion to $2.45 billion. It slashed its full-year earnings forecast to 84 cents to 91 cents per share, down from its prior range of $1.26 to $1.36 per share.

In addition to the weak Halloween sales, the retailer said its annual results would also show the impact of helium shortages, along with higher freight and distribution costs.

Harrison added a positive note to his statement, noting that the chain is “encouraged that our retail operations have approached a 100% in stock helium position since we began the fourth quarter, resulting in abating helium headwinds at retail and a bounce-back in the helium impacted categories.”