Party City shares sink 11% after earnings hurt by 'operational disruptions' and helium shortages

Party City Holdco Inc. shares fell 11.2% in early Thursday trading after the company reported third-quarter earnings that were hurt by operational disruptions, inflationary pressure, helium shortages and lower-than-expected sales, according to Chief Executive James Harrison. The party goods company reported a net loss of $2.4 million, or 3 cents per share, after income of $10.1 million, or 8 cents per share, last year. Adjusted EPS was 8 cents, well below the 18-cents FactSet consensus. Sales totaled $553.0 million, down from $560.1 million, and also below the $592.0 million FactSet guidance. Halloween sales were down 90 basis points with stronger web and temporary store business unable to offset permanent store same-store sales declines. Same-store sales dropped 1% against a FactSet outlook for a 0.9% drop. For 2018, Party City expects revenue of $2.43 billion to $2.46 billion, down from previous guidance of $2.44 billion to $2.49 billion; EPS of $1.22 to $1.27, down from $1.46 to $1.57 previously; and adjusted EPS of $1.60 to $1.65, down from $1.76 to $1.87. The FactSet consensus is for sales of $2.48 billion and EPS of $1.83. Party City has approved a $100 million share repurchase program. GlobalData Retail attributes the third-quarter shortfall to competition from Halloween pop-up stores and retail giants like Target Corp. . "Looking ahead, the Toy City pop-up stores should help Party City as it moves into the holiday season," GlobalData wrote in a note. "However, while Toys R Us has left a gap in the market, we are cautious about how much Party City can capitalize on this if only because so many other retailers are now crowding into the toys space." Party City shares have dropped 36.2% in 2018 while the S&P 500 index has gained 5% for the period.

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